By Santanu Choudhury 

NEW DELHI-- General Motors Co. is retooling its game plan for India, betting $1 billion it can emerge as a bigger force in a market where it currently is a bit player with a somewhat tarnished reputation.

Stefan Jacoby, running some of the Detroit auto maker's operations in international markets, said Wednesday that one Indian factory will be closed, shifting focus to a single plant with 220,000 vehicles of capacity. That factory, in the state of Maharashtra, will in five years produce 10 new Chevrolet models, a third of which will be earmarked for export.

"Today we draw the line and mark the beginning of a new General Motors here in India," Mr. Jacoby said at a news conference attended by Chief Executive Mary Barra. "We have a lot of hard work ahead of us."

The auto maker's sales are down sharply in India through six months, even as the wider industry has grown modestly and as India is seen as one of the emerging markets with the highest potential. Having to recall 269,000 vehicles in the past two years in India, GM has seen its image take a hit.

GM produces seven vehicles in India, including the Spark and Beat hatchbacks, but only holds about 1.3% of India's light-vehicle market, according to WardsAuto.com.

It trails nearly every major auto maker selling in the market, including Toyota Motor Corp., Ford Motor Co. and Hyundai Motor Co. It also lags far behind the big local players, including market leader Maruti Suzuki India Ltd., Tata Motors and Mahindra & Mahindra.

GM's India investment is part of a larger $5 billion quest to develop more competitive vehicles for emerging markets. The auto maker is a big player in China and Brazil, but Mr. Jacoby has said the company has too many platforms on which it builds vehicles.

GM will work with its Chinese partner, SAIC Motor Corp., to create a new family of low-price Chevrolets off a single architecture and aimed at an array of emerging markets. The goal is for 2 million vehicles, or 20% of GM's entire production, to come from that family of vehicles.

The auto maker has sold vehicles in India since 1996 and invested $1 billion to build two factories. A plant in the western state of Gujarat will close under the plan by Mr. Jacoby, a former Volkswagen AG executive. While production capacity at the Maharashtra plant will increase to 220,000 vehicles annually, overall capacity will decline 21% due to the closure.

Mr. Jacoby's plan to revive GM's presence in India is among the most important he faces. He doesn't oversee operations in China, where GM holds 14% of the market, and doesn't oversee big operations in Europe and Brazil.

Since joining GM in 2013 from Volvo Car Corp., where he spent about two years as CEO, Mr. Jacoby has realigned GM's footprint in Asia and other markets with an eye on boosting profits and limiting risk. The company closed plants in Australia and Indonesia and has scaled back in Thailand.

Mr. Jacoby's plan for India will be welcomed by the government of Prime Minister Narendra Modi, which has been promoting foreign investment through a "Made in India" campaign. In March, Ford opened a new factory in western India, part of $17.3 billion in direct foreign investment India has attracted over the first five months of 2015.

Ford's new investment, part of its own multibillion growth plan in India, is aimed at boosting exports from India, much like GM's plan. Unlike the biggest economies in Asia, India has had limited success in shipping automobiles and other big-ticket items to other markets.

Write to Santanu Choudhury at santanu.choudhury@wsj.com