Hyundai has emerged as the knight in shining armour for General Motors’ facility at Talegaon near Pune.
The Korean automaker has signed a term sheet agreement for acquiring the assets here even while GM is still to sort out severance pay issues with its workforce at the plant. With Hyundai now entering the picture, this process will hopefully be expedited and the decks cleared in the coming weeks/months.
The Talegaon facility was initially meant for Great Wall Motors of China which had announced with much fanfare of its India intent way back in early 2020. The company had then followed this up quickly with an impressive display of its products at the Delhi Auto Expo.
The script, however, went for a toss when COVID made its presence felt in India which led to a series of lockdowns. Relations with China then took a nosedive when the country’s army got extra aggressive in occupying Indian territory at Ladakh.
Clearly, in this backdrop, there was no way any Chinese investment was going to get the green signal and the Centre also got into overdrive with its clarion call on Atma Nirbharta or self-reliance. It was immaterial that China remained a key pivot in the global supply chain of parts for a host of user industries. Its aggression was clearly unwelcome to India’s business interests.
Great Wall’s Long Wait
There was no way fresh funding would happen as a result and this left Great Wall Motors in a bind. The Chinese SUV maker waited for nearly two years by which time it had decided to set up operations in Thailand and Brazil. It shelved its plans to take over the GM plant at Talegaon last year and Hyundai has now entered the picture.
Industry observers say there will now be quicker steps to solving the impasse with the GM workforce. Whether the Korean carmaker will hire them or go in for a golden handshake remains to be seen but the change of hands will now happen a lot faster compared to the inertia of the last couple of years.
“The Maharashtra Government will pull out all the stops to get Hyundai take over the reins at Talegaon. It is important to convey the message that the State is getting new investments especially with Gujarat hogging the limelight over the last few months,” an industry executive told this writer.
The fact that the BJP is at the seat of power in both states is also seen as an added advantage in terms of getting the right support from the Centre. For instance, the Ford plant at Sanand was sold to Tata Motors while Maharashtra is now seeing a similar sequence of events with GM and Hyundai.
Tamil Nadu, on the other hand, has not had much luck with Ford’s facility at Maraimalai Nagar near Chennai even while reports were doing the rounds that brands such as Ola Electric and Hyundai had explored the possibility of taking it over. The DMK government tried really hard to find a buyer without much luck and it looks as if this plant will just end up being abandoned eventually.
The Chinese Paradox
The paradox here is that it is only the Chinese that need additional capacities except that they are not going to be allowed to invest in India owing to geopolitical tensions. There was a time when Changan Automobile was surveying the Indian landscape and speculation was rife that it would even consider the Ford Chennai facility. The company shelved its India plans subsequently and chose to focus on the ASEAN region.
MG Motor India, the local arm of SAIC, had bought out GM’s plant at Halol in Gujarat six years ago and has quickly made a name for itself in this market. The company would have ideally liked to set up a second plant but this was not going to be possible with the strained relations between India and China. MG Motor has now gone in for capacity expansion at Halol even while one could argue that the Ford facility in Chennai or Sanand (which went to Tata Motors) might have just been a comfortable fit.
Politics plays a huge role in business decisions across the world and India is no exception to the rule. The good thing is that it has helped two plants in Gujarat and Maharashtra get a fresh lease of life. Even in 2017, SAIC took over the GM plant at Halol without too much of a fuss, a testimony to the efficiency of the bureaucracy at Gujarat.
Gujarat On Overdrive
A senior auto industry official had told this writer earlier at the time of the Vedanta-Foxconn deal, which caused a lot of heartburn in Maharashtra, that Gujarat had been “outstanding” in capturing large projects. “Maharashtra needs to introspect and figure out what went wrong. There is plenty Maharashtra can do at the local level to become more competitive,” he had added.
Now with Hyundai being the latest entrant to the State — which is already home to legacy brands such as Bajaj Auto, Mahindra & Mahindra, Tata Motors, Force Motors, Kinetic, Skoda Volkswagen, Fiat etc — Maharashtra will have reasons to feel pleased. After all, the GM issue has been hanging in the balance for three years now and a solution is finally in sight.
Since the time India opened its doors to MNCs, there have been success stories like Hyundai as well as some high profile exits which caused plants to be abandoned. The first was PAL-Peugeot which had its operations at Kalyan near Mumbai and called it quits in 1997. Companies like M&M did explore the possibility of using this facility for Project Scorpio but dropped the idea and settled for Nashik.
Peugeot, Daewoo Exits
Daewoo was next to go when its parent company in South Korea went belly-up and the Indian unit at Surajpur near Delhi closed down as a result. GM, which had acquired Daewoo globally, was keen on taking over the Surajpur plant but nothing much materialised. It then became home to an entrepreneurial initiative in the contract manufacturing space before the curtains came down on Daewoo.
The other significant exit saga was that of Tata Motors at Singur in West Bengal which was the original site for the Nano. Severe political opposition ensured that this was not going to happen and the company finally decided that it had to shut shop because things were going nowhere.
This was the time Gujarat stepped into the picture and laid down the carpet for Tata Motors. The Nano also paved the way for other carmakers to enter Gujarat, a list that included Maruti Suzuki, Ford, Peugeot (which later shelved its proposal), Honda Motorcycle & Scooter India etc.
The other closure in West Bengal was Hindustan Motors’ decades-old plant at Uttarpara when it was crystal clear that the Ambassador had run its course and was just not finding any new customers. With the burial of Amby, an important chapter in India’s automobile history had come to an end.
Burial Of Legacy Brands
The other big legacy brand, Premier Automobiles, had also shut down operations at its Kurla facility in Mumbai a lot earlier when it was apparent that the Padmini brand had no future. It was the symbol of the city’s cab fleet where drivers continued using the model till they realised that nostalgia was not going to win them customers or business.
The Kurla plant was used by Fiat for some years till it decided to start a new innings with Tata Motors at Ranjangaon near Pune. Right from Kurla and Uttarpara to Singur, Surajpur and Kalyan, the list of defunct car plants is quite sizable.
It is a grim reminder that the last 30 years of economic reforms have not been easy going for everybody. While big brands like Ford and GM have perished, there have been fighters like Hyundai and Kia.
Strong local brands such as Tatas and Mahindras as well as Chinese players like MG Motor and BYD have proved to be formidable while a global icon like Honda has struggled and had to shut down one plant at Greater Noida near Delhi and produce cars from another at Rajasthan. India is clearly not for the fainthearted.
Hyundai Signs Term Sheet Pact To Acquire GM's Talegaon Plant