China’s SAIC Motor will slash its 49 per cent stake in its Indian joint venture and halt further investment, five people said, the latest sign of how political tension between the Asian neighbours is spilling over into business.
SAIC’s decision comes after India introduced limits on investment from its neighbours in 2020, a move widely seen as being aimed at China. Friction between the two nations intensified after a border standoff that same year.
To try and grow in India, SAIC, one of China’s largest state-owned auto companies, opted to tie up with local conglomerate JSW Group.
Indian and Chinese leaders met last month to ease relations, raising hope of improved business ties. There has since been little sign of progress, with Indian auto firms, for instance, still awaiting Chinese approval to buy rare earths from China.
The tie-up with JSW was meant to inject funds into the automaker’s largest production base outside of China and also ease regulatory hurdles. But it has not delivered, said one of the people. All five of the people familiar with the matter declined to be identified because they weren’t authorised to speak publicly about it.
SAIC is not pulling out of India but wants to dilute its stake in JSW MG Motor significantly and will continue to provide technology and products for the venture, said a second person.
JSW has offered to purchase most of SAIC’s stake to become the single largest shareholder, but the two sides disagree on valuation, with the Chinese carmaker seeking a higher price, the person said, adding that talks are ongoing.
SAIC, JSW and JSW MG Motor did not respond to requests for comment.
Stalled investment proposals
The friction between the two companies is not all down to politics.
JSW also appears to have irked its partner by pursuing talks with rival Chinese firm Chery Automobile to build cars in India, three of the people said.
JSW has long wanted to sell cars under its own brand and talks are at an advanced stage with Chery for a technology, not equity, partnership for cars JSW will build in India, said one of the people.
Chery did not respond to a request for comment.
India, the world’s third-largest auto market, is increasingly positioning itself as a production hub for the industry. Japan’s Suzuki Motor, the dominant player in India, plans to invest some $8 billion there over the next five to six years and make the country its global production base for electric cars.
SAIC entered India in 2019 under its MG Motor brand with plans to invest more than $650 million. It took over a former General Motors factory in western Gujarat state with an annual production capacity of about 120,000 cars.
In 2020, it submitted an investment proposal to build electric vehicles under a government incentive scheme but was declined.
Last year, it sold a majority stake in the local company to Indian entities with JSW picking up a 35 per cent share for about $300 million, valuing the maker of the Hector SUV and Windsor EV at $1.2 billion. Proceeds went to SAIC rather than the local entity, two of the people said.
JSW MG Motor has since submitted a proposal to invest $240 million in EV manufacturing, the outcome of which is pending.
A sticking point is whether any return on investment will go to China considering the source of the initial funds, said a third person.
The ministries of heavy industries and commerce, which are reviewing the proposal, did not immediately respond to requests for comment.
JSW MG Motor is losing money and cash flow is constrained, earnings reports filed with the government showed. Still, it sold 61,000 cars in 2024 from 16,500 in 2019 and, while sales of its traditionally powered cars are falling, it has become India’s second-biggest EV maker after Tata Motors.
Competition in the world’s third-largest car market is set to intensify with the July entry of U.S. EV peer Tesla.
