General Motors said it will stop selling vehicles in India, the latest retrenching by the U.S. auto maker as it redirects investment in future technology and bolsters its presence in more-lucrative markets where it has a leadership position. 

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Once the world’s biggest car company in terms of sales, GM has been retreating from several major and unprofitable markets under Chief Executive Mary Barra. In doing so, it has withdrawn from a race with Toyota Motor, Volkswagen and the Renault-Nissan alliance for the industry’s coveted sales crown. 

While GM will continue building products in India to sell in other countries, its decision to pull out of the market in the world’s second-most populous country reflects a wider recalculation of where it should be laying bets. It has centered most of its emerging-markets investment on China and Brazil. 

India’s car market is fragmented, and auto makers that succeed there typically have a frugal approach to engineering. While selling cars in a market with millions of new buyers annually increases scale, turning a profit is difficult there, and other auto makers have expressed frustration. In March, Ford Motor finance chief Bob Shanks said the crowded market and weak pricing make India “very difficult” and Ford’s approach “needs to change.” 

GM is also pulling out entirely from South Africa, with plans to sell its relatively small manufacturing operation there to Isuzu Motors Ltd. The departures follow GM’s decision to pull out of Russia in 2015 and the pending sale of its European division, Opel, to Peugeot. 

“In the most important markets where we have the strongest franchise, we’re in it to win it,” GM President Dan Ammann said in an interview. Although GM is notching record profits on strong sales in the U.S. and China, Mr. Ammann said the company still operates “in a world of finite resources.” 

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Toyota, Ford, Honda Motor and the Renault SA-Nissan Motor venture all have sizable sales operations in India, but all trail local companies in the race for volume. 

In addition to China and the U.S., the world’s two biggest markets, GM is focused on South America, Mr. Ammann said. At the same time, the auto maker is investing about $600 million a year on self-driving car engineering, car-sharing ventures and development aimed at helping the 109-year-old auto maker compete with Silicon Valley tech giants looking to edge in on the car business. 

“If we’re going to allocate resources to develop leading capability there, what are the things we’re going to stop doing in order to support that?” Mr. Ammann said. GM’s recent investments in companies like ride-sharing company Lyft and the purchase of San Francisco autonomous-vehicle startup Cruise Automation “forces a resource-allocation discussion.” 

GM has been working to shore up losses in many countries included in its international operations division. Profits from China put that unit in the black, but the rest of those markets, including India, South Africa, the Middle East and several Asian countries, lost a combined? $838 million in 2016. 

GM expects to book a charge of about $500 million during the current quarter to cover the moves in India and South Africa. It anticipates future savings of $100 million a year as a result of the strategy. 

GM entered the Indian market a century ago, selling Chevrolets there in 1918 and opening a factory near Bombay in 1928. It left the country along with other foreign auto makers in 1958 and returned in 1995. 

This latest departure represents a rare vote of no-confidence in the Indian market among global car makers. All of the world’s major auto companies have a presence in India, which is projected to eventually overtake Western Europe as the No.3 vehicle market in the world. 

GM is a small player, however, selling about 29,000 vehicles in India last year, representing market share of less than 1%. GM sells more cars in the U.S. in less than half a typical workweek. 

The auto maker will continue to tap India’s relatively-low cost base to assemble cars for export. It operates an assembly plant in Maharashtra, where production volumes tripled to about 53,000 vehicles in 2016. It will continue to operate a design and engineering center in Bangalore. 

India’s auto market is growing, with sales through April hitting 1.4 million vehicles, or a 9% increase over the same period in 2016, according to Auto companies have been pouring investment into the country, with $16 billion spent on plants and infrastructure over the past decade and a half, according to the Indian government. 

The market leader, Maruti Suzuki, owned by Japan’s Suzuki Motor, holds a dominant 40% market share. Several auto makers have gained steam recently by launching small crossover SUVs that are agile enough for congested cities but seen as durable enough to handle battered roads. 

GM will end its sales and manufacturing operation in South Africa later this year. GM said it has a weak position in that market, selling around 20,000 vehicles there last year. 

Isuzu, GM’s joint-venture partner in South Africa, will take over a commercial-vehicle factory and GM’s stake in the JV. Terms weren’t disclosed. 

–Christine Rogers contributed to this article.