Amidst slowdown in the global automobile segment, the largest US automaker, General Motors has decided to withdraw from New Zealand, Australia, and Thailand after it left the regions of India, Russia, and Western Europe to pursue interests in Electric Vehicles and Autopilot Cars. This seems to indicate a general trend in the auto sector and how the future may play out with the rise of EVs and hail-ride business.
Crux of the Matter
Golden Retreat of Holden? US’ largest automaker General Motors (GM) announced that it will shun the first All-Australian automaker brand, Holden – one of Australia’s most popular brands – by 2021. As a part of the retreat, GM would wind up its engineering, operations, and sales from both Australia and New Zealand. The share of the car-maker in Australia had dropped from over 20% in the early 2000s to merely 4% recently.
…but none could overcome the challenges of the investments needed for the highly fragmented right-hand-drive market, the economics to support growing the brand, and delivering an appropriate return on investment. – GM President Mark Reuss
GM has justified the move by saying that it aligns with its long-term strategy. Its exit strategy is plain – exit the markets that don’t reap adequate returns. This move is likely to affect 828 employees in Australia and New Zealand. GM has also asserted that it will help all the affected employees and customers during the transition period. Warranties and Services for the existing cars will still be serviceable and any recalls or safety issues will be addressed as per the company.
General Motor’s exit has antagonized Australian Prime Minister Scott Morrison. GM was given a quarter-billion-dollar bailout less than a decade ago and PM Morrison was disappointed that the company had not respected taxpayers’ money and had burnt it.
They let the brand just wither away on their watch. Now they are leaving it behind. I think that’s very disappointing, that, over many years, more than $2bn was directly provided to General Motors for the Holden operations. I think at the end of the day it shows throwing all that taxpayer money at them … they were never going to respect that. – Australian PM Scott Morrison
Chevrolet Exit Déjà vu GM had also announced that it would withdraw its Chevrolet brand from Thailand and sell its Rayong Factory in Thailand to China’s Great Wall Motors who intends to capture the Southeast Asian market. GWM is an automaker involved in manufacturing sports utility cars, pickups, and SUVs. GM will lay off nearly 1,500 workers.
We will also promote the development of the local supply chain, research and development and related industries, plus contribute more to the exchequer of both the local Rayong and Thailand governments. – Liu Xiangshang, GWM VP for Global Strategy
GWM VP for Global Strategy Liu Xiangshang also stated that the acquisition of the Thailand plant is a part of GWM’s global strategy. After having established an automobile plant in Russia‘s Tula, GWM is planning to acquire GM’s Talegaon Plant in India, a move that seems like a market-share-hunt. The US automaker had also withdrawn from Russia, Western Europe, and India citing its need to free up cash to venture into EVs, automated driving technology, and ride-hailing business. GM’s share dipped to 1% in the Indian auto sector that chimes for fuel-efficiency and low prices. As luck may have it after GM’s exit, India’s automobile growth shrank. “Global automobile sector seems to have hit the peak,” said IMP’s Gita Gopinath. In recent times, German automobile production hit a 22 year low.
Hungry EVs Coupling with the global trend of renewable resources, many automobile makers are making a shift or at least a stride towards manufacturing Electric Vehicles (EVs). General Motors also hinted that if it were to ever start operating again in the countries it has left, it would enter with niche specialty vehicles. Before announcing exit, GM had presented an extensive and aggressive plan for embarking upon the journey of Electric Vehicles which may also come equipped with Super Cruise driver-assistance technology. Company President Mark Reuss had said that the company plans to develop 20 EVs in 3 years. However, GM is going to have a tough time competing with Tesla, which is like the Apple of the EVs.
Traditional Automobile’s Swan Song? With companies withdrawing from less-reaping markets to have buoyant cash to invest in research and development of Electric Vehicles, the global auto sector seems to have taken a sharp hit. Another pinching element of slowing demand could be the ride-hail business that is gaining traction partly because of the environmental concerns. However, some argue that the technology and the power-production required in manufacturing and sustaining EVs has similar Carbon impact as traditional automobiles. Major players like Uber, Lyft, Ola (in India), etc. are gradually filling the void that the automakers’ exit leaves behind. It remains a question on how the auto market will be segmented with environmentally safe Electric Vehicles, and safe-drive Autopilot Vehicles taking place of the automobiles. It also remains to be seen how ride-hailing businesses will prosper during that transition period.
Curiopedia
A ridesharing company is a company that matches passengers with vehicles, via websites and mobile apps. Ridesharing companies for automobiles are commonly referred to as ride-hailing services, and such companies exist for aircraft and watercraft as well. Ridesharing companies are examples of the sharing economy and shared mobility. Ridesharing companies have been noted for providing service in less populated or poorer areas that are not regularly served by taxicabs and charging lower rates than taxicabs since taxicab rates are often set by local jurisdictions. More Info
Tesla, Inc. is an American electric vehicle and clean energy company based in Palo Alto, California. The company specializes in electric vehicle manufacturing, battery energy storage from home to grid scale and, through its acquisition of SolarCity, solar panel and solar roof tile manufacturing. After 11 years in the market, Tesla ranked as the world’s best selling plug-in passenger car manufacturer in 2019, both as a brand and by automotive group, with a market share of 17% of the plug-in segment sales. Tesla global vehicle sales increased 50% from 245,240 units in 2018 to 367,849 units in 2019. More Info
Curated Coverage
CNBC – General Motors is retreating from Australia, New Zealand and Thailand
Time – GM Is Pulling out of Australia, New Zealand and Thailand
Chicago Tribune – General Motors surrenders in Australia, New Zealand, Thailand
Economic Times Auto – German auto output hits 22-year low in 2019
The Guardian – Are electric vehicles really so climate friendly?
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