Saturday, March 18, 2023
HomeOpinionDashboardHyundai in talks to buy GM’s Talegaon plant but your Creta, Venue...

Hyundai in talks to buy GM’s Talegaon plant but your Creta, Venue isn’t coming anytime soon

It won’t be before late-2024 or early-2025 that a Hyundai-badged car leaves the Talegaon factory. There are many reasons for that.

Text Size:

In a surprise announcement Monday, Hyundai Motor India Limited (HMIL) said they were in exclusive talks to acquire the now abandoned General Motors (GM) manufacturing facility in Talegaon outside Pune. The fact that HMIL managed to keep this ‘deal talk’ under wraps is quite remarkable considering it’s in an extremely ‘leaky’ industry. Prospective Hyundai buyers were quick to conclude that their waiting woes would be addressed. Particularly those eyeing a Creta or a Venue, wait for which exceeds six months.

But allow me to be a killjoy.

It won’t be before late-2024 or early-2025 that a Hyundai-badged car leaves the Talegaon factory. There are many reasons for that.

Also read: Honda, Hyundai, MG—ADAS is next big safety feature on Indian cars. The new City proves that

Why the wait

First, this is just a ‘term-sheet’ between Hyundai and General Motors to acquire the land, the building and certain machinery. This is akin to a ‘Letter of Intent’, but usually with financial conditions attached, in case the deal does not go through. The process before any deal is concluded could take several months. Tata Motors’ acquisition of Ford’s Sanand plant is a case in point. The Indian company announced in March 2022 that it was in negotiations with Ford, but the deal was only closed in December 2022.

Second, HMIL will get their top engineers and experts to evaluate the condition of the Talegaon facility and the associated machinery. After all, the last Chevrolet-badged Beat, which was destined for export, left the plant in December 2020. GM had withdrawn from the Indian market in 2017.

Moreover, the GM facility in Talegaon, spread over 300 acres, has been lying empty save for security guards and some maintenance staff. Even with maintenance, the industrial machinery at the plant would have aged and will require update. Hyundai will likely need to gut out some of the existing machinery, bring new industrial robots and infrastructure such as a more modern paint-shop.

There is precedent that all initial talks don’t turn materialise into deals. Talks between GM and China’s Great Wall Motors, which were at an advanced stage, were torpedoed by the Chinese military incursions in the Ladakh sector. Since then, the facility with a relatively small capacity of 130,000 vehicles and 160,000 engines. HMIL’s Sriperumbudur facility outside Chennai has an annual capacity of 850,000 cars and engines, a number achieved through a recent upgrade.

Another hurdle that HIML may have to face in the plant’s acquisition is an ongoing legal battle between GM union workers and the American auto giant. The company faces a multitude of litigation across courts over settlements to the former workers.

Also read: Delhi-Mumbai Expressway is impressive but Indians’ driving lanes apart

What’s Hyundai looking at?

Investing in a brownfield project over a greenfield one has clear benefits such as avoiding all the hassles of land acquisition. Car factory plant sites require huge land parcels and involve protracted negotiations involving multiple stakeholders. Hyundai, if it gets the deal, can avoid all these hurdles.

The Tata Motors-Ford deal cost the Indian automaker Rs 725 crore. Even if Tata Motors gutted out the Sanand plant and replaced all the existing machinery, the building itself and the existing electrical, water and sewage would be worth much more than the sum Tata Motors would have paid. A similar situation will likely emerge for the Koreans in Talegaon.

For HMIL, managing a second facility thousands of kilometers away from their existing plant (in Sriperumbudur) might seem odd. But there is clear business sense here too. The Chakan-Talegaon region outside Pune has a very active automotive industry with Bajaj Auto, Tata Motors, Mahindra Automotive, Mercedes-Benz and Skoda-Volkswagen all having large manufacturing facilities within a 50-kilometer radius. This would mean that most, if not all, of HMIL’s major suppliers would have their own facilities and warehouses already present in the region. This industrial belt of Maharashtra also has a base of trained workers.

This new plant will add much-needed capacity Hyundai has been struggling to achieve amid massive demand. The Korean carmaker, who have been pipped by India’s Tata Motors on a couple of occasions for the second-largest carmaker position, is running their Sriperumbudur plant above rated capacity.

If the deal goes through, its reopening may coincide with HMIL’s plans to launch a ‘Made In India’ electric vehicle in 2025. Hyundai could also convert this facility into one that will primarily make electric vehicles.

India is not in a position to let large manufacturing capacity wither away — the tragic case of Daewoo Motors’ old plant in Surajpur outside Greater Noida still haunts some.

The deal, if it goes through, will be a boost to India’s manufacturing ambitions and inspire global confidence in the auto sector. As for Hyundai buyers, there wait shall continue—from Creta to Tucson.

@kushanmitra is an automotive journalist based in New Delhi. Views are personal.

(Edited by Anurag Chaubey)

Subscribe to our channels on YouTube & Telegram

Support Our Journalism

India needs fair, non-hyphenated and questioning journalism, packed with on-ground reporting. ThePrint – with exceptional reporters, columnists and editors – is doing just that.

Sustaining this needs support from wonderful readers like you.

Whether you live in India or overseas, you can take a paid subscription by clicking here.

Support Our Journalism