A assembly line of SAIC-GM-Wuling in Qingdao. (File photo/Xinhua)
General Motors' Chinese joint venture SAIC-GM-Wuling Automobile Co began assembling two car models in India this August from the knockdown kits sent by the venture's Liuzhou headquarters, the Chinese-language China Business Journal reports.
This is the first time a Chinese automobile company has given the intellectual property rights and technology to build an entire vehicle to an overseas joint venture. Traditionally, carmakers have only exported finished cars to other countries, the report noted.
SAIC-GM-Wuling Automobile is a joint venture between General Motors, SAIC Motor and Liuzhou Wuling Motors Co. "From the second half of this year, we will start building two car models using CKD kits at General Motors India (a 50-50 joint venture between SAIC and GM)," a spokesman for the company said.
CKD stands for complete knock down, a complete kit for assembling a vehicle. It is a common practice among automakers, as well as bus and rail manufacturers, to sell CKD kits to their foreign affiliates in order to avoid high import taxes or to receive tax incentives for providing employment locally.
SAIC-GM-Wuling Automobile had transported a CKD assembly facility to GM's Halol-based manufacturing plant in India in 2011. The first batch of its sample product has already been tested. The two car models will be sold through GM India's distribution channels, and SAIC-GM-Wuling Automobile will charge a fee for the use of its intellectual property rights.
Unlike the traditional export strategy adopted by independent automobile brands, SAIC-GM-Wuling's strategy is to expand its Indian market by relying heavily on the joint venture's two shareholders. In 2009, SAIC and GM formed a new 50-50 joint-venture investment company called General Motors SAIC Investment Ltd in Hong Kong, to expand investment in India.
China Business Journal said mini cars were particularly popular in India's car market. India sold 1.87 million passenger cars in 2010, including 1.45 million mini cars. Mini cars account for 60%-70% percent of the market.
In addition to introducing SAIC-GM-Wuling's mini cars in the country, GM India has also attracted a large number of senior executives from SAIC and GM.
SAIC-GM-Wuling's low production costs, high efficiency, user-oriented policy and high market responsiveness have been its key strengths in expanding in the Indian market, the report said.
In 2011, SAIC-GM-Wuling's overseas sales grew to 15,298 vehicles, double the previous year's sales. As of August, the company had expanded its business to nearly 40 countries and regions, claiming a 10% share of China's annual exports of mini cars.