General Motors said today it plans to stop selling cars in India and South Africa by the end of this year, a move that continues the automaker's retreat from parts of the world where its profits were lagging so it can focus on profitable regions.
The Detroit automaker said early Thursday that it will transform its business in India into an export-only operation and will sell its operations in South Africa to Isuzu. GM said its will stop selling its Chevrolet brand in both markets by the end of 2017.
GM wants to focus more financial resources on regions of the world where it is profitable, especially North America and China, and focus on developing autonomous cars, and will likely need those resources more as a seven year growth period of U.S. industry sales comes to an end.
“As the industry continues to change, we are transforming our business, establishing GM as a more focused and disciplined company,” GM CEO Mary Barra said in a statement. “We are committed to deploying capital to higher return initiatives that will enable us to lead in our core business and in the future of personal mobility."
The decision follows GM's decision to sell its European division to French automaker PSA Groupe last month, the automaker's decision to discontinue sales of mainstream Chevrolet models in Europe in 2015, to exit Russia in 2015 and end manufacturing in Australia in 2016.
GM's willingness to back out of difficult markets is a radical departure for an automaker that for years was focused on maintaining its position as one of the world's largest automakers.
“Recent actions by General Motors demonstrate clearly it is not the GM of old," said Michelle Krebs, executive analyst for Autotrader. "Today's GM management is correctly focused on profits, not sales volume and market share. It has shown a willingness to cut its losses if there's no clear path to profitability and market dominance."
GM also is the second automaker this week to announce restructuring actions amid declining U.S. industry sales, pressure from shareholders to shore up stock prices and shareholder dividends and the growing need to invest heavily to develop autonomous vehicles. Ford announced plans on Wednesday to cut 1,400 salaried workers out of 15,000 in various departments in North America and Asia.The decision to stop selling vehicles in India is especially bold. Just a few years ago most automotive analysts were predicting that the "BRIC" countries -- Brazil, Russia, India and China -- would be engines of growth for global automakers for years to come.
China, of course, has emerged as the largest global market for new vehicle sales. China's auto market, the world's largest, grew to 28 million vehicles in 2016 and will likely climb 5 percent in 2017 to 29.4 million vehicles, according to the China Association of Automobile Manufacturers.
The auto industry in Brazil, in contrast, has been in freefall as the country's economy has gone into a tailspin and the country has dealt with political turmoil.
In India, industry sales have been growing. Total industry sales increased 7% in 2016 to 3.3 million, according to LMC Automotive, and sales there are expected to increase 8% annually over the next seven years to 6.2 million by 2025. Still, auto sales fell at the end of last year as the country made changes to its monetary policy.
"Light vehicle sales are in recovery mode since the negative consumer sentiment is subsiding with the easing cash situation, and buyers are slowly returning to the market in the aftermath of the government’s demonetization drive in the final months of 2016," LMC Automotive said in a March report.
In India, GM’s said it will transform its plant at Talegaon into an export hub for Mexico and Central and South American markets and will stop selling any vehicles to consumers there. The automaker only sold 29,000 vehicles in India last year.
While GM will continue to operate its plant in India it will reduce its workforce by about 8%, or 400 employees.
“In India, our exports have tripled over the past year, and this will remain our focus going forward,” GM President Dan Ammann said in a statement. “We determined that the increased investment required for an extensive and flexible product portfolio would not deliver a leadership position or long-term profitability in the domestic market.”
In South Africa, Isuzu will purchase GM’s Struandale plant and GM’s remaining 30% stake in the Isuzu Truck South Africa joint venture. Isuzu will also purchase GM’s Vehicle Conversion and Distribution Centre and assume control of the Parts Distribution Centre. GM also said it is in discussions with PSA Groupe, which has agreed to purchase Opel in Europe, to purchase or acquire the Opel brand in South Africa.