With Hyundai now sewing up the pact to buy out General Motors’ plant at Talegaon near Pune, the American automaker will be relieved that its exit script has finally been executed to perfection.
Since the time it first announced in 2017 that it was going to stop retailing cars in India, industry observers were reasonably convinced that this was the first part of GM’s move to call it a day in this part of the world. The company was in restructuring mode globally and was on its way to shutting down operations in ASEAN, Australia, Russia and South Africa with only the US, Brazil and China targeted as its priority markets.
In the case of India, GM’s long-term ally in China, SAIC Motor Corp, moved in quickly to acquire its Halol plant in Gujarat while plans were on to keep Talegaon operational for export markets especially in Latin America.
However, it was only going to be a matter of time before this facility would change hands too and this is precisely what happened three years later with another Chinese entity — Great Wall Motors — announcing its decision to buy out Talegaon from GM. This was in early 2020 just before the Delhi Auto Expo and Great Wall used the occasion to showcase its SUV range which promised to be a disruptor in India.
However, the script completely went off track when the Chinese army decided to occupy Indian territory at Ladakh and relations between the two countries nosedived. This was also the time of COVID when the world had gone into a tailspin and there was a lot of anger directed at China which was seen as the chief perpetrator of the deadly virus.
China On Hold
The Centre was quite right, thereafter, in keeping a close eye on fresh investments from China since there was no way business ties could continue with a war-like situation on the border. Great Wall Motors waited and waited till it became quite clear that there was no solution in sight, and it finally abandoned its plans to acquire the GM facility.
This standoff between India and China also led to Changan Automobiles shelving all ideas to enter this market even while reports were doing the rounds that it was looking at sites in Andhra Pradesh, Telangana and Tamil Nadu.
Meanwhile, with COVID still on the rampage, Ford announced that it was pulling out of India since global dynamics had changed dramatically and the time had come to focus on critical areas like electrification, which needed substantial investments. It made little sense to continue in a market which was yielding little both in terms of profits and building a sizable presence.
As in the case of GM, Ford had two plants, and it quickly found a suitor for its Gujarat unit in the form of Tata Motors. The Sanand facility was the second that Ford had commissioned in India after Maraimalai Nagar near Chennai. There were hopes that even this older plant, which came, would find a buyer, but it continues to languish even after a severance package was finalised with its workforce.
Ironically, Hyundai was one of the possible suitors whose name was doing the rounds for Maraimalai Nagar, and even though the Korean carmaker did not comment on this issue, the industry grapevine was abuzz with this development. There were indications that the Hyundai group was in talks with Ford, and if everything went according to plan, the plant would be home to its range of cars and those of Kia.
Potential Candidates
Perhaps this was just a rumour even as names like Ola Electric also cropped up as possible candidates to take over the Maraimalai Nagar facility. Even before Tata Motors decided to buy out the Ford plant at Sanand, top teams from the company had met the Tamil Nadu Chief Minister sparking speculation that a deal was in the works for Maraimamalai Nagar.
Now with Hyundai ready to start a new chapter at the GM plant in Talegaon, industry observers have been wondering why the company did not even consider the Ford unit in Tamil Nadu. One school of thought was of the opinion that the Korean carmaker did not want to put all its eggs in one basket — from the viewpoint of location — and was content having just one plant near Chennai. Maharashtra would, hence, mark a new phase in its expansion plans both for electric vehicles and access to the western region.
From the Tamil Nadu Government’s point of view, the Hyundai move would have been perceived as a setback since its long-term resident was best equipped to take over the Ford facility instead of taking the more tedious route towards Maharashtra. After all, Maraimalai Nagar is part of a vibrant auto hub which includes Oragadam and Sriperumbudur, which are home to big brands such as Daimler India Commercial Vehicles, Renault-Nissan, Royal Enfield, Hyundai, BMW and Yamaha.
Tamil Nadu has now made it known that it is still in talks with auto majors to acquire the Maraimalai Nagar plant, and it will be interesting to see how the story progresses. Some months ago, there was news of BYD of China emerging as a possible candidate (the Chinese electric vehicle maker’s subsequent investment proposals for Telangana have been rejected with India and China still at loggerheads), but nothing much was heard thereafter.
Foxconn or Stellantis?
Right now, if one were to go through a process of elimination, only two prominent names crop up as potential investors for the Ford plant: Foxconn and Stellantis. The former has been constantly in the news for its plans to invest in India, where Tamil Nadu is seen as a favourable destination in addition to Karnataka and Telangana. Whether Foxconn will be open to buying out the Ford facility is the million dollar question since it would rather have an asset-light model which could take the form of a leasing arrangement instead.
In the case of Stellantis, it already has a plant in Tiruvallur near Chennai but would perhaps be open to exploring the Ford facility if the commercial terms are favourable enough. The company produces the Citroen range of cars and SUVs as part of the PSA umbrella at Tiruvallur, while its other half, Fiat Chrysler Automobiles, has the Ranjangaon plant near Pune for its Jeep range.
Stellantis, to that extent, has its hands full, and there would be no compelling reason to look at a third facility at a time when it is still building a presence in India and has a long way to go in terms of grabbing market share.
With the Chinese effectively debarred from making fresh investments, there is hardly anyone left who would be interested in the Ford plant at Maraimalai Nagar. If nothing works out eventually, it will join the list of abandoned plants which includes PAL-Peugeot at Kalyan near Mumbai, Daewoo at Surajpur near Delhi and Hindustan Motors at Uttarpara in West Bengal.
Should that happen, it will serve as yet another grim reminder of a top-profile exit in the world's third-largest car market. By the end of the day, India is about the survival of the fittest and rewards only those who have enough fire in their belly to take on the competition.
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