China’s largest automaker SAIC Motor has inked a joint venture agreement with the JSW Group to accelerate the transformation and growth of MG Motor in India, which has been struggling to raise capital to fund future growth.
As per the shareholder agreement, share purchase and share subscription agreement signed in London, JSW Group will hold a 35 per cent stake in the Indian JV operations. SAIC will continue supporting the joint venture with advanced technology and products to deliver mobility solutions with a focus on the Indian consumer.
The two companies, however, did not specify if a new joint venture company would be floated or JSW would pick up the 35 per cent stake in MG Motor India, a wholly-owned subsidiary of SAIC Motor.
MG Motor is a British brand that is currently owned by Shanghai-headquartered SAIC Motor.
Earlier this year, MG Motor India had announced plans to offer majority stakes to Indian local partners over the next two to four years as part of a five-year business roadmap in the country.
MG Motor India has been looking to raise capital to fund its next phase of growth. Its plans to bring in more capital to the country from its Chinese parent have not been successful, amid heightened tension between India and China in the wake of border clashes that erupted in June 2020 at Galwan Valley in Ladakh.
In November last year, the company faced a probe by the Ministry of Corporate Affairs over irregularities and audit deficiencies of its financial records and was asked to explain why it posted operational losses in 2019-2020. Besides, the Income Tax Department had also conducted searches at the company’s office.
The automaker had been waiting for the Indian government’s FDI approval for over two years. With little success, it started looking for other options to raise the required capital to fund various projects including capacity expansion.
Last year, MG Motor India had announced plans to invest around Rs 4,000 crore on a second manufacturing unit, for which it was in talks with several state governments, including Gujarat where its first facility is located.
The company, which was looking to expand the annual production capacity of its plant at Halol in Gujarat to 1.25 lakh units, was looking to add another 1.75 lakh units capacity from the second plant and take its overall capacity to 3 lakh units a year in the two years. However, its expansion plans got delayed due to the funding crunch.
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With JSW coming in as a partner, SAIC is looking to accelerate MG Motor’s growth in India.
“In the growing Indian automotive market, both partners shall work closely to bring in the best of innovation, in creating greener and smarter mobility products and services for our consumers, seizing market opportunities, continuously expanding the brand influence and market share of our products, and achieving greater success for MG in India,” said Wang Xiaoqiu, SAIC Motor President, in a joint statement.
JSW Group’s Parth Jindal stated, “Our strategic collaboration with SAIC Motor aims to grow and transform the MG Motor operations in India with a focus on green mobility solutions.”
The joint venture paves the way for bringing world-class technology-enabled futuristic suite of automobile products including the new generation of intelligent connected NEVs and ICE vehicles, he added.
“The JV’s focus on broader localisation initiatives will yield financially accretive synergies through economies of scale while providing the highest level of customer service to the Indian consumer,” said Jindal.
One of the key focus areas of the joint venture will be to pursue the development of the EV ecosystem and to take a leadership position in this space, he stated.
“We would like to thank SAIC and MG Motor for choosing JSW as their partners of choice and look forward to building one of India’s largest automobile companies together,” Jindal said.
The companies said the JV will also leverage the large presence of JSW Group across B2B and B2C sectors of the Indian economy to augment local sourcing and establish a robust supply chain.
Together, SAIC and JSW Group said they would work towards creating a smart and sustainable automotive ecosystem in India by bolstering the development of new energy vehicles and internal combustion engines with carbon neutrality, sustainability and green mobility at the centre of its shared vision.
Since its inception in 2019, MG Motor India has invested Rs 7,000 crore and sold close to 200,000 vehicles in the country. The $23 billion JSW Group has a presence in various sectors including steel, energy, infrastructure, cement, paints, e-commerce, venture capital and sports.
Edited by Swetha Kannan
