Great Wall Motors: India lost

Text/Leju Finance Li Shanshan

Recently, Great Wall Motors has not been going well.

The Great Wall Euler "stealing chips" incident that broke out in November last year was defended by a large number of car owners, engaged in suspected post-whitewashing, to be named by CCTV to criticize false propaganda, and then to Euler Automobile's frequent apologies and solutions, which is still fermenting.

Another brand of Great Wall Motors, the Tank 300 Cyberpunk, has caused dissatisfaction among the intended owners due to multiple delays in delivery.

In addition, Great Wall Motors shelved its two-year plan to acquire GM's Indian plant, which is now frustrated again.

On January 10, Great Wall Motors reached an agreement with General Motors to extend the acquisition period of the Talegaon plant. According to the agreement, Great Wall Motor's acquisition period for the Tarigon plant will be extended until March this year and the investment period will be extended until June this year.

The Great Wall responded to the news that the company will continue to fulfill its investment commitments to India and that its strategy for the Indian market has not changed.

The reason why Great Wall Motors and GM reached a delay in the acquisition is that GM has not yet reached an agreement with the workers at the Tarigon plant on a labor agreement, so the acquisition project has not been approved by the local regulatory authorities.

Acquisitions have been a flurry of twists and turns

The acquisition of the Indian plant is a long and difficult obstacle for Great Wall Motors' globalization strategy. The acquisition lasted for two years, but there was no result, and this time it encountered twists and turns.

It is reported that after Great Wall Motors acquires GM's Indian plant, it will no longer employ the old employees of this plant, and they will be given voluntary retirement. But what workers need is a job, and union members at the plant don't accept voluntary retirement money from GM.

As a result, GM asked the local government for permission to close the factory, but was refused. Subsequently, he fired the workers, and the factory union filed a lawsuit in court for illegal layoffs.

After hearing opinions from both sides, the court said GM's layoffs were illegal, ordered the company to pay 50 percent of the monthly wages to all 1,086 workers each month, and restricted GM from transferring the plant until a formal ruling was made in the case. As a result, Great Wall Motor's acquisition plan has been postponed again.

In fact, in January 2020, Great Wall Motors and GM motor announced that the two sides had reached a transaction agreement to acquire GM's Tarigan plant in India, with a transaction value of about 250 million to 300 million US dollars, and Great Wall's EV and SUV model production will be produced at this plant, and the transaction was scheduled to be completed in the second half of that year.

However, the agreement was subject to government and relevant regulatory approval, thus laying the groundwork for the two sides in a deal that had not been smooth from the start.

In September 2020, it was reported that GM's transaction to sell its Indian plant to Great Wall Motors was delayed. It is reported that it is expected to take a long time to obtain the approval of the Indian government for China-related transactions.

At the same time, due to the outbreak of the new crown epidemic, India has imposed stricter regulations on investment from abroad. Subsequently, coupled with other non-market factors, the two parties failed to reach the transaction as scheduled, and the transaction time was postponed twice, one to June 2021 and the other to the end of 2021.

Keep an eye on the Indian market

Although the acquisition of Indian factories is a long road, in the eyes of Great Wall Motors, the Indian market is the most important piece of its global puzzle.

According to the data, India's car ownership per 1,000 people is about 50, far below the world average of 180 vehicles, and the market size is still in the initial stage of development. In addition, India has the second largest population in the world, gdp is the fastest growing among large economies, and its youth under the age of 25 account for half of the total population.

This means that India, the world's fourth-largest automotive market after China, the United States and Japan, can unleash enormous market potential.

According to the latest data from the Association of Indian Automobile Manufacturers (SIAM), passenger cars were sold in the domestic market of 215,626 units in November 2021 and 1,829,693 units in April-November 2022. According to past data, passenger cars were sold in India's domestic market in the 2020-2021 fiscal year, with an average annual sales of about 2.94 million units in the past seven years.

In addition, India is an important base for the radiation of South Asia, with an average annual export of about 650,000 vehicles in recent years, and its potential economic growth and export prospects may be the main reason why Great Wall Motors decided to acquire the Indian factory in the first place.

At the same time, due to the withdrawal of traditional car companies such as GM, Volkswagen, and Ford from the Indian market, it has also given its own brands, including Great Wall Motors, a huge market space.

In fact, Great Wall Motors has long been eyeing the meat of the Indian market. As early as 2016, Great Wall set up a research and development center in Bangalore, India, mainly engaged in the development of new energy and autonomous driving software.

In addition, before signing the cooperation agreement with GM, Great Wall had long wanted to enter the Indian market through the acquisition of Fiat Chrysler. It is reported that shortly after the Great Wall confirmed its intention to acquire in 2017, it was denied by Fiat, and said that it had never been in contact with the Great Wall on this matter, and the Great Wall's plan to enter the Indian market fell short.

In addition, Great Wall Motors' actions at the 2020 India Auto Show also have traces to follow. In February of that year, Great Wall Motors officially unveiled the Delhi International Motor Show with the Haval brand and Great Wall EV. It is worth noting that the Great Wall's first participation in the Indian Auto Show included an independent pavilion with a booth area of 3150 square meters, setting a record for the scale of the Great Wall's exhibition.

The high-profile appearance announced its determination to enter the Indian market, and the Great Wall used this as a starting point to release the Indian market strategy.

"Hoarding" overseas factories

In recent years, the competition in the domestic automobile market has become increasingly fierce, and many automobile brands have made efforts in overseas markets. According to the data, China's automobile exports have exceeded 2 million in 2021, an increase of 1 times year-on-year, hitting a record high.

As the pioneer of Chinese automobile brands going overseas, Great Wall Motor has achieved export in 1998, and its export products cover SUVs, cars and pickup trucks, mainly exported to Russia, Chile, South Africa and other countries and regions.

In June 2019, Great Wall Motor's first overseas wholly-owned manufacturing enterprise, Great Wall Motor's Tula plant in Russia, was officially put into operation, and the first global car of its own brand, the Haval F7, rolled off the production line and was listed overseas. The landing and operation of this factory, in addition to covering the local Market in Russia, can also become the key starting point for the Great Wall to open up the Asian and European markets.

Subsequently, following the agreement with GM to acquire the Tarigon plant in India on January 10, 2020, a month later, Great Wall Motors and GM negotiated a new deal. The two sides jointly announced that Great Wall Motors will acquire GM's Rayong manufacturing plant in Thailand, and the two sides plan to complete the transaction and final handover by the end of 2020.

While Great Wall Motors successfully won two overseas plants, the acquisition plan of the Tarigon plant in India was frequently unfavorable, so Great Wall set its sights on the South American market.

At the beginning of August last year, it was reported that Great Wall Motors would reallocate some of its investment in India to Brazil. In response, Great Wall Motors responded that the company's plan to acquire the General Motors plant in India is still in progress.

However, in the past week alone, Great Wall Motors has announced that it has signed a formal agreement with Daimler Group to acquire the Iracemapolis plant in Brazil. At that time, Meng Xiangjun, rotating president of Great Wall Motors, said that the transaction would accelerate the development and strategic landing of Great Wall Motors in the South American market, and further promote the transformation of Great Wall Motors into a global technology travel company.

In addition, in October last year, it was reported that Great Wall Motors was interested in acquiring Nissan's Barcelona plant in Spain. However, two months later, Great Wall withdrew the acquisition plan. It is understood that Great Wall Motors may have abandoned the acquisition of this plant because it could not achieve higher production. At present, Great Wall Motors has not responded to this matter.

So far, Great Wall Motors has realized a factory layout with Brazil, Thailand and Russia as the fulcrum, covering three continents in Asia, Europe and the United States in an all-round way.

In addition, Great Wall Motor has also built KD (bulk assembly) factories in Ecuador, Malaysia, Tunisia and Bulgaria, and has established more than 500 global (except China) networks in more than 60 countries and regions around the world.

According to the latest data, in 2021, Great Wall Motor's overseas sales exceeded 140,000 units, reaching 142,793 units, an increase of 103.7% year-on-year, and sales accounted for 11.1%. According to the "2025 Strategy" released in June last year, Great Wall Motors will achieve global sales of 4 million vehicles by 2025.

At present, going to the international market has become an inevitable choice for independent brands to become bigger and stronger. Wei Jianjun, chairman of Great Wall Motors, once said that the domestic market provides excellent development opportunities for the Great Wall, but if it cannot "go out" and grow into a world-renowned automobile brand, it will lose this era.