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SAIC, GM mull India JV

(China Daily/agencies)
Updated: 2009-12-04 08:50

SAIC Motor Corp, China's largest automaker, is close to an agreement to cooperate with General Motors Co on producing and selling vehicles in India, two people familiar with the talks said.

The companies are setting up a 50-50 joint venture that would take over GM's Indian assets, one of the people said, asking not to be identified because the plans are private. GM will make an announcement today about the two carmakers' cooperation in the country, a second person said.

The India venture, to be set up in Hong Kong, will make and sell minivans, mini-trucks and small cars to tap demand for low-cost vehicles, one person said. GM and SAIC have been in talks about introducing light commercial vehicles in India, where economic growth is spurring demand for small trucks, GM India's Managing Director Karl Slym said in September.

"GM doesn't have the low-cost products, but SAIC has experience in products that are very cost-effective in China," said Yale Zhang, a Shanghai-based director at auto consulting company CSM Asia. "The price would be very competitive in India as well."

SAIC spokeswoman Zhu Xiangjun declined to comment. Calls to Johan Willems, a Shanghai-based GM spokesman, weren't answered.

GM will also sell a one percent stake in its Chinese passenger car venture to SAIC for $84.5 million in response to an accounting rule change, one person said. Detroit-based GM and Shanghai-based SAIC now own 50 percent each of the China venture, Shanghai General Motors Co. Today's announcement about the India venture may include the stake sale, another person said.

The stake sale is in response to Chinese accounting rule changes effective Jan 1, 2010, that will only allow companies to consolidate earnings from ventures in which they have majority control, one person said. By holding a 51 percent stake, SAIC will be able to reflect earnings from the venture in its performance, the person said.

The sale was approved by GM's board this week, and SAIC's board will consider the transaction today, the person said. Shares of SAIC were halted in Shanghai trading yesterday after the company said on Wednesday it plans to restructure its assets.

GM and SAIC are targeting annual sales of 300,000 vehicles in India in five years, a person said. GM sold 65,702 units in India last year and aims to sell 75,000 vehicles this year, the company said on Sept 24.