General Motors Banking On Chinese Designed Chevy Sail To Push Indian Unit Out of Doldrums

China is increasingly becoming a hub for General Motors Company's (NYSE: GM) global operations as both a major market and now a design center for the company's South Asian operations, and the company is banking on a locally designed model to breath new wind into its Indian subsidiary's sails.

GM reported Wednesday that Chinese sales for it and its joint ventures GM-Wuling and GM-SAIC reached record levels in August, rising 7.3 percent over the previous year with 220,996 units sold. Buick brand sales rose slightly, 2.8 percent, and Chevrolet sales grew 14.7 percent. The breakout success, though, was the Chevrolet Sail model, which increased sales 40.6 percent to 16,176 vehicles, making it GM's fastest growing Chinese vehicle.

The Chevrolet sale is notable not only for its sales success in China, but also for the fact that it was designed domestically in China, rather than in Europe or North America. The latest generation of Sail was developed at GM's Pan-Asia Technical Automotive Center in Shanghai specifically for developing markets like China. Since then, the car has been a massive success in China where it occupies a niche for four-door "family" sedans.

General Motors is now hoping that the Shanghai-designed Sail which has been so successful in China will be the solution the company's struggling Indian branch has been looking for in recent years. GM announced this week that it had begun production of the Sail for the Indian market and that the vehicle will go on sale there beginning in October, according to Reuters.

"Sail is in some ways perhaps the first vehicle designed with primarily Asian customer requirements," GM India president Lowell Paddock said, according to Reuters. The vehicle represents the more regional and emerging markets-focused designed approach of the GM-SAIC joint venture and Shanghai design house, and SAIC in fact holds a 50 percent stake in GM India.

The General has struggled in the Indian market where its offerings have been overpriced compared to cheap competition from local manufacturers like Tata Motors and Maruti Suzuki and Asian competitors like Hyundai Motors and Toyota Motor Corporation (NYSE: TM). The Toyota Etios sells for around $9,600 in India, while GM's closest competitor, the Aveo, retails for around $10,760. The Tata Nano, the world's cheapest car, sells for just under $2,800.

General Motors' Indian sales declined 11 percent in the first half of 2012, according to the Times of India. The company has only a paltry 4 percent of Indian market share.

GM hopes that the Chevy Sail will manage to undercut competition from vehicles like the Toyota Etios. The Sail will fall squarely in the same market niche as the Etios, and will likely be slightly cheaper. The 2011 Sail retails for around $9,000 in China, according to egmCarTech, pricing it just below the Etios and substantially below current GM offerings like the Aveo. Moreover, General Motors is hoping that the design sensibility of the Shanghai team will make the Sail a more palatable offering for Indian buyers. GM will also offer the Sail with both diesel and gasoline engines, an especially important consideration given that the Indian government subsidizes diesel fuel, making it dramatically cheaper than gasoline.