Chevrolet bids Indian roads adieu

It came as a thunderbolt for many customers as well as dealers, when General Motors(GM) announced that it will stop selling Chevrolet cars in India, specially when the company was planning increased investments to the tune of $1billion in India. But, it was writing on the wall for those who had cared to see.

GM was one the early entrants into the Indian market when it entered into a 50-50 joint venture with Hindustan Motors to produce and sell Opel branded cars in 1996.  GM then bought out HM’s interest in 1999 and launched Chevrolet in 2003. However, Chevrolet could not, at any point of time, make a strong case for itself despite their early arrival. They have battled through recalls, thinning margins and other crises, but unfortunately  failed to emerge as the victor.  There are numerous reasons behind GM’s decision to discontinue domestic sales in India.

Business in India was not giving handsome returns to the company. Chevrolet had managed to capture less than 1% of the Indian automobile market and GM India’s contribution to the General Motors’turnover was less than 0.5%. This was a clear indication that Chevrolet had failed to grasp and thereafter grab the market, which is one of the fastest growing automobiles markets in the world. The management announced the decision as part of a series of restructuring actions and explained the decision as GM’s commitment to deploy capital in high-return initiatives.

But why did Chevrolet fail? Why did fail to grab the Indian customer’s attention?

Chevrolet did not get their timing right. They failed to launch the correct models at the correct times. At a time when Hyundai and Maruti understood the sentiments of the market and launched a flurry of hatchbacks, Chevrolet did not focus on hatchbacks while targeting these customers. Hence, despite quality products in their line-up, they could not taste success. Correct timing would continue to elude Chevrolet. As the Indian customers began to get more demanding, lack of investment in technology at critical times resulted in an fleet of outdated models. By contrast, its competitors were willing to discontinue even the most popular and established models in pursuit of offering something better to the customers.

Chevrolet always looked to implement global vehicular standards in India, that is, it offered in India, what people around the world were asking for. The company failed to recognize that India was a sizable market that had its own unique needs which the company was expected to cater to. It also discarded the option of becoming a manufacturer that designs, manufactures and markets its products locally. This was a significant reason behind the company’s disconnect with the Indian customers at large.

Another major reason for their non-success was the marketing strategy they chose to employ. Companies all over the world know that Indian customers in general, and the auto consumers in particular are a paradox. The want to pay less, but get more. On the other hand, they were willing to pay extra for utilities/additions that they deemed to be novel. Chevrolet always relied heavily on discounts, which is a Push strategy, rather than investing in building the brand in India, a Pull strategy. This tarnished the brand image and disturbed the company’s place on the price-value matrix. The customers, eyeing for an ideal mix of affordability and exclusivity were not delighted when it came to the latter.

Car-buying is a consensus driven affair in India. So no matter what the companies promise in their advertisements, the average Indian customer while buying a car, will strongly hold onto what his relatives and neighbors recommend. Chevrolet was deeply impacted by negative word of mouth with regards to after sales service. The company’s cars were saddled with the reputation of expensive German spare parts and high cost of service. The troubles began around the time of launch of Opel. Despite Chevrolet’s efforts, the impressions never left the brand.

Though things had just begun to look better for Chevrolet with cars like the Cruze and the Beat getting good reception. Both giving a good driving experience and value-for-money to the customer. Even Chevrolet Tavera also did well among the fleet owners before the Toyota Innova was launched. But it was a case of too little too late. The sales which attained their peak in 2011 started sliding down with figures reaching a fifth in 2016. Prospects for the company looked bleak at best. Adding to that, the constant shuffle of CEOs in the recent years made it trickier for the company to adopt a constant vision and execute any strategy that might have resulted in their survival in the fifth largest passenger-car market in the world-India.

It is not that all other competing companies are flourishing in India. Companies like Nissan and Skoda are making losses, and doing worse than what Chevrolet was doing. But these companies, because of their alliances (Nissan with Renault; Skoda with Volkswagen) can afford monetary losses. Instead, they are getting increased brand recognition in the country.

Though Chevrolet has decided to stop selling cars in India, it will not stop making cars in India. The company does not want to give up the benefits India offers as a manufacturing hub with an excellent supplier base which is extremely competitive. The company has two manufacturing facilities in India, one in Halol, Gujarat and the other in Talegaon, Maharashtra. Chevrolet will turn its Talegaon plant into an export-only facility, for supplying cars in Mexico, Chile, Peru and other Latin American countries and plans to sell  the Halol facility off to SAIC HK Ltd, a unit of China’s SAIC Motor Corp. Ltd. It will continue to operate the General Motors Technical Centre in Bengaluru. The fate of the dealership network is unknown with dealers just being instructed to clear their stocks by December 31, 2017. The company however has reassured its customers that they will continue to honor the original Chevrolet vehicle warranty, maintain their network of service centers and provide assistance by trained personnel as and when required.

The exit will probably not hurt the company when it comes to money, but it sure has caused a huge dent in the brand image. The impact on the dealers as well as customers has made a possible re-entry very difficult for the company. Chevrolet’s withdrawal comes at a time when car manufacturers from all over the world are betting big on the Indian automobile market. Ford, which comes from the same country as Chevrolet, is grappled with its own struggles, but remains committed. Jeep, another American car manufacturer is enthusiastic as its made-in-India Jeep Compass gets set to hit the Indian by the last quarter of 2017. India is emerging stronger and faster. It is set to overtake Japan as well as Germany to become the third largest car market across the globe. Bidding adieu at this juncture clearly shows how dire the situation had become for Chevrolet. But I hope that in hindsight they don’t regret their decision to call it quits just when good times were round the corner.

Shashank.

 

 

 

 

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