AutoBeta(AutoBeta.net)03/23 Report--

Jindal Southwest, India's largest steelmaker, announced a joint venture JSW MG Motor India with SAIC, China's largest carmaker, on Wednesday local time.

It is understood that the joint venture, valued at about US $1.5 billion, will produce and sell MG-branded electric cars in India and plans to launch a new product every 3-6 months. The joint venture aims to increase its share of India's new energy vehicle market from 2 per cent to 33 per cent by 2030 and plans to sell 1 million electric passenger cars that year. JSW hopes to increase the degree of localization of R & D while using local production to reduce costs, with the goal of achieving full localization, including R & D, by 2030.

Sajjan Jindal, chairman of the JSW Group, said that the group has been looking for opportunities to enter the Indian car market, and the rise of new energy vehicles has made it possible to enter the market. The technological advantages of MG make it a good object of cooperation. In terms of market competition strategy, Jindal believes that the joint venture may follow the example of Maruti Suzuki and seek a breakthrough in market share through the rapid launch of models.

What is really of concern is the equity ratio. It is understood that the joint venture JSW MG Motor India is 35% owned by JSW Group, and financial institutions, car dealers and employees will also hold some shares, which increases the proportion of shares held by JSW Group to 51%, with control of the joint venture company, while SAIC holds 49%. Sun Shaojun, an auto blogger, said the joint venture itself was the result of India's JSW Group's direct grab of MG's Indian stake. In general, SAIC does not absolutely control the joint venture, but also helps the joint venture produce electric cars and build a supply chain.

In June 2023, the Hindustan Times reported that India's Jindal Southwest (JSW) was trying to acquire a stake in Mingjue Motor India Co., Ltd. (MG Motor India). It is reported that JSW will hold 45-48 per cent of SAIC MG India, while dealers and Indian employees will hold 5-8 per cent, which means SAIC will lose control of MG India and its stake will be less than 50 per cent. MG India will also become a company controlled by Indians.

SAIC issued a clarification on this news. SAIC said that "SAIC MG India was forcibly acquired shares at a low price and lost control", which is a serious departure from the facts. " SAIC's international operation strictly abides by the policies and regulations of China and the countries where its overseas business is located, fully respects the laws of the market, and fully grasps the autonomy. The equity transaction of SAIC holding MG India involving MG India needs to be approved by the Chinese government, and we will release official information in due course. "

SAIC issued a clarification designed to emphasize that it had not lost control of MG India, but the industry believed that SAIC had control of MG India at that time, but the deal was not completed, or even after SAIC reached a deal with JSW of India, it still had control.

In October 2023, SAIC Group and JSW Group of India signed a strategic cooperation agreement in London, UK. SAIC Group will introduce JSW Group as strategic investors to further support MG India to expand its market share by increasing capital and shares. The two sides will actively cooperate with their superior resources in automotive, steel, energy and other fields to create a mutually beneficial and win-win cooperation model to ensure the sustainable development of MG India. According to the agreement, upon completion of the capital increase and share increase, India's JSW Group will own a 35 per cent stake in MG India. The relevant cooperation plan still needs to be approved by the government.

According to the data, in 2017, SAIC invested 3.275 billion yuan to set up MG India Automobile Co., Ltd., through the acquisition and comprehensive renovation of the Harrol plant of General Motors of India Co., Ltd., to build it into a modern standard automobile production base. Since the Harrol plant opened in 2019, MG India has launched a number of car products, most of which are assembled in India.

Statistics show that electric cars are currently expected to account for only 4% of passenger car sales in India, while the government hopes to achieve a 30% market share by 2030 through a series of measures. In 2023, MG sold about 60, 000 vehicles in India, up nearly 25% from the previous year and growing for four consecutive years, but its overall market share is not high, and its market share in the electric vehicle market (2%) is much lower than that of the leader Tata Group (70%), but that may change as the overall electric car market heats up.

Generally speaking, the Indian market is both attractive and challenging for foreign companies. Although the Indian government has made efforts to improve the investment environment in recent years, foreign companies operating in India still have to face a series of complex laws and regulations and political situations. A spokesman for the Chinese Foreign Ministry said earlier that the Chinese government has always required Chinese enterprises to operate legally and complied with regulations overseas, while firmly supporting Chinese enterprises in safeguarding their legitimate rights and interests. The spokesman stressed that the Indian side should act in accordance with the law to provide a fair, just and non-discriminatory business environment for Chinese enterprises to invest and operate in India.

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