General Motors puts $1bn India plan 'on hold'

GM car factory India Image copyright AFP
Image caption A regulatory crackdown on diesel vehicles has also led the company to rethink its plans

General Motors has put on hold a planned $1bn investment in India as it reassesses its strategy in the country.

Its sales in India have fallen nearly 40%, and its share of the passenger vehicle market has also dropped.

A regulatory crackdown on diesel vehicles has also led the company to rethink its plans.

More than 5,000 new cars are sold in India every day - and it is forecast to be the world's third biggest vehicle market by 2020.

In 2015, Ford committed to investing $1bn (£760m) in India to boost its domestic market share and make the country a global export hub.

Image copyright AP

Analysis: Shilpa Kannan, BBC News, Delhi

India is among the fastest growing car markets in the world. No wonder then that some of the world's biggest carmakers are investing heavily.

But it's also not an easy market to crack. General Motors India has still been posting losses two decades after gaining a presence in the country.

India has turned out to be such a difficult market that a former high-ranking GM India employee told me he wouldn't be surprised if the company closed at least one of its two factories in India.

So what's gone wrong?

Partly it's down to what consumers here want. Indians mainly want value for money - a vehicle that gives good mileage, has easy after-sales service and a good resale value.

Other brands like Maruti Suzuki and Hyundai, which dominate the market, have so far managed to deliver on that.

Analysts here say GM got the India market wrong from the beginning and didn't do anything to arrest sagging sales.

"In addition to the shift in customer preferences, the industry is facing unprecedented regulatory uncertainty. Like our competitors, we are paying close attention to how this impacts our business. In light of this, we are conducting a full review of our future product programme in India," Swati Bhattacharya, a spokeswoman at GM India told the BBC.

"As a result, we are also putting on hold future investment in our all-new vehicle family in India until we firm up our product portfolio plan."

The BBC's Shilpa Kannan in Delhi says things have not gone to plan for the company since it unveiled its vehicles for India at the country's biggest auto show a few years ago.

But while GM's share has fallen below 1% in the domestic market, the automaker, which has two factories in India, has seen a rise in exports.

Exports rose to 7,217 units in April-May this year, against 590 units in the same period last year.