SAIC entry could trigger Chinese auto wave in Gujarat

Till recently, Rakesh Solanki (name changed on request) was part of the workforce at General Motors’ Halol facility in Gujarat.

When the company decided to shut down its operations there, he was offered the option of relocating to its other plant near Pune or accept a one-time settlement. Solanki did not see any reason to move out of Gujarat and opted for the financial package. Obviously, this meant sitting at home and keeping his fingers crossed for an alternative job.

A ray of hope arrived when the State government signed a memorandum of understanding with SAIC Motor Corp of China to start operations at the Halol facility. This would also see a number of ancillary units set up shop in the area and pave the way for an all-new automotive ecosystem. Solanki and a few other hundred ex-GM workers are now hopeful of a brighter future.

“We are not sure if SAIC will hire us but are aware that there will be a lot of workforce required at the plant,” he says. “If the company is looking for skilled manpower, we hope to get a chance to work with the Chinese.” In fact, even as India and China are now locked in a fierce face-off thousands of miles away near Bhutan, the show goes on in the business arena. There is no question that GM’s exit was a setback to Gujarat, which had proclaimed itself as the next big thing happening in the country’s automotive growth story. What began with Tata Motors’s Nano project soon grabbed the fancy of other brands such as Ford, Maruti Suzuki and Honda even while there was a dropped proposal in the form of France’s PSA Group, which makes the Peugeot and Citroen brands.

The dampening of sentiment caused by GM has now been made up by SAIC entering the fray. Sources in the State Industries Department have confirmed that other automakers from China have also queued up for investment talks with the Gujarat government.

For sometime now, the likes of Changan Automobile and Great Wall Motors have been on the prowl in India to explore growth opportunities. Chennai, Andhra Pradesh and Maharashtra were generally touted as the preferred manufacturing locations but it now looks as if Gujarat has emerged a serious contender too.

“There is more interest now among Chinese carmakers to invest in Gujarat,” says an official. “We are also getting enquiries from companies in China, which are in the business of products like tyres.” The fact that Chinese component makers are keen on entering India only means that their OEM customers have big plans lined up.

SAIC has committed an investment of over ₹2,000 crore in India over the next five years. Vehicle production will begin in 2019 and the goal is to produce 50,000 to 70,000 cars per annum initially.

SAIC will also bring five ancillary units to support its manufacturing processes. These include Yan Feng, Huichoung, Waling Industry, Ling Yun and Sevic that will also set up separate facilities.

The SAIC plant alone will employ about 1,000 workers while the ancillary units will require additional workforce. All in all, this will translate into a larger workforce than what GM deployed, which will only boost the hopes of people like Solanki. The picture will become clearer in the coming weeks as SAIC kicks off its hiring process as part of the drive to ramp up production quickly.

All this will mean a new turn in the country’s automobile script, which began over two decades ago when the gates were thrown open to multinational automakers. Quite predictably, there were entrants from the US, Europe, Japan and Korea and over the years, there have been abrupt departures and some remarkable success stories.

Chinese interest actually began eight years ago when the global slowdown crippled the world and Detroit, in particular, faced the brunt. This was the time when GM reached out to its loyal ally, SAIC, to help revive its operations in India. Nothing much came out of this partnership eventually but the seeds of Chinese interest were sown by then.

Today, SAIC is back in the reckoning and it does look as if its moves will trigger interest from other Chinese companies. How they fare in India remains a million dollar question but it would be unwise to rubbish their intent as the likes of Geely, which acquired Volvo Cars, have shown that they are no easy pushovers.