General Motors and China’s SAIC Joint Venture to Expand Operations into Indian Automotive Market

Located in the southwestern Chinese province of Guangxi, is Liuzhou. With a population of 1.3 million, it is considered a small city by Chinese standards and few outside that country have ever heard of it. Despite its remote location and relative obscurity, however, Liuzhou is the home of China’s second-largest automaker behind Volkswagen AG.

SAIC-GM-Wuling Automobile Company (SGMW) is a joint venture between Liuzhou’s city government, General Motors Company and Shanghai Automotive Industry Corporation (SAIC) and from January through October, the automaker produced and sold 893,729 light vehicles in China.

Last week SAIC and GM announced that they have formed a new Hong Kong-based investment company to help facilitate SGMW’s expansion into markets beyond China’s borders, beginning with India.

SAIC’s India-expansion plans call for the introduction of two of its most popular models, the Chevrolet Spark small sedan and the Wuling microvan, in early 2010.

Some industry analysts say that the Chevy Spark will face stiff competition. Domestic automakers including Tata Motors and Mahindra as well as foreign companies including Japan’s Suzuki Motors already produce millions of vehicles to satisfy the country’s insatiable appetite for small cars.

The prospects for SGMW’s Wuling microvan, however, appear much more promising. Competition in India’s light commercial vehicle market is low and the Wuling is well suited for emerging markets. In China, the vehicles are highly prized by rural and urban owners.

The Wuling combines high quality and dependability, featuring GM-derived engineering, with low cost. In China the Wuling sells for between 30,000 and 60,000 yuan – the equivalent of between $4,400 and $8,800.

As in China, the versatility of microvans makes them especially popular in rural areas of India. They make ideal product hauling vehicles for agriculture and industry during the workweek and can double as people haulers for large families on weekends and for special occasions like India’s numerous religious and secular holidays.

In the Wuling’s home country, SGMW sold 840,909 units between January and October of this year.

Global Insight market analyst John Zeng says, "I am not sure whether there is demand in India for the small cars built by GM’s joint ventures with SAIC in China. But the prospects of SGMW’s minivans certainly look good in the market there."

For GM, SGMW’s expansion into the Indian market will provide a footprint in one of the world’s fastest growing economies. The move may also serve as vindication for SAIC following the company’s recent failure to salvage its South Korean subsidiary, Saangyong Motor Company.

In a statement issued last week, SAIC chairman Hu Maoyuan said, "By leveraging our individual assets and those of our China joint ventures, SAIC and GM are in a strong position to introduce competitive products outside China that will satisfy the needs of consumers in India and other high-potential global markets."

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