A car production line in a General Motors factory. GM Korea has consolidated its finances. File photo: iStock
A car production line in a General Motors factory. GM was one of many US corporations that banked heavily on saving labor costs through offshoring. File photo: iStock

The ongoing military tensions between India and China have upset General Motor’s plan to sell its factory to a Chinese carmaker. The US carmaker had entered into an agreement in January to transfer the fully operational car manufacturing and export hub plant at Talegaon in Maharashtra state to Great Wall Motors.

However, the sale plan hit a roadblock in April when the Indian government amended its foreign direct investment norms policy to monitor and check investments into Indian companies from neighboring countries. The changes were made to curb the opportunistic takeovers and acquisitions of Indian companies amid the ongoing Covid-19 pandemic.

All such investments now require prior government approval. The General Motors-Great Wall Motors proposal is one of more than 200 Chinese investment proposals submitted to the Department of Promotion of Industry and Internal Trade that are awaiting security clearance. The Chinese carmaker plans to manufacture its Havel range of SUVs and EVs at the Talegaon plant and set up a research center in Bangalore.

Media reports say that due to this stalemate General Motors may run into unplanned costs, but the US carmaker is firm about winding down the Talegaon plan by next month. It had planned to use the sale proceeds of $250 million-$300 million to pay off liabilities incurred with its exit from manufacturing in India. But now it may have to issue severance pay to its Talegaon plant workers, which it could have avoided if the deal had proceeded as planned.

General Motors decided in 2017 to shut down its domestic operations in India, as it could not garner enough market share, despite being in the country for 22 years. It had sold its Halol plant in Gujarat state to another Chinese major, Shanghai Automotive Industry Corp, which now manufactures its Morris Garages Hector, Hector Plus and ZS EV SUVs.

In September 2019, General Motors also transferred the operations of its Technology Centre in Bangalore to Indian information technology major Tata Consultancy Services. As per the agreement, the Indian company took over the facility along with 1,300 employees of General Motors.

The Talegaon plant was being used to export its Chevrolet “Beat” hatchback cars and engines to Latin America and other markets. The US carmaker is making its final exit plans from India after failing to make any profit in its operations in the country.

General Motor’s country rival Ford is also planning to scale down its operations in India. It has entered into a joint venture with Mahindra & Mahindra, and the Indian firm will hold a 51% stake. As per the deal, Ford will transfer its India operations to the joint venture, including its personnel and assembly plants in Chennai and Sanand.

The American carmaker will retain the Ford engine plant operations in Sanand as well as the Global Business Services unit, Ford Credit and Ford Smart Mobility.