JSW Group-MG Motor India deal: A new plant, local sourcing now on cards

By Consultants Review Team Saturday, 02 December 2023


Consultants Review Team

As Chinese automobile giant SAIC Motor seals the deal with Indian billionaire Sajjan Jindal’s JSW Group for its India arm MG Motor India, a slew of plans that the company management had envisaged may finally take shape. From a new manufacturing plant to increasing local sourcing, the next few years are expected to be action packed for the electric vehicle (EV) maker.

Yesterday, the two groups signed a joint venture agreement in London that includes JSW picking up 35 per cent stake in MG Motor India - a local subsidiary of the Shanghai-based Chinese state-owned automobile major SAIC Motor. According to a joint statement, SAIC Motor and JSW Group will create strategic synergies by bringing together resources in the field of automobiles and new technology. “The joint venture will also undertake multiple new initiatives including augmenting local sourcing, improving charging infrastructure, expansion of production capacity, and introducing a broader range of vehicles with a focus on green mobility,” they said.

As per sources, the move - one of the first in the direction - will be followed by an initial public offer (IPO) by the MG Motor management that will help the Indian partner raise its share of ownership into entity. Additionally, MG Motor management may bring in additional investors with local origin to “Indianise the company”. The move came at time when the auto maker has been increasingly under scrutiny by the authorities. In fact, MG Motor received a notice from the Registrar of Companies under the Ministry of Corporate Affairs in 2022, summoning its top brass, citing irregularities in its financials.

Way forward

With JSW on board, say people privy with the developments, the EV maker may finally focus on its growth plans that its management had drawn over the past year or so. Among these, a new manufacturing plant - second for MG Motor India - is on the cards. While the company already has a facility in Halol, Gujarat with an annual capacity of 120,000 units, it plans to come up with its a new plant in the region.

In an interaction earlier this year, Rajeev Chaba, the former President and Managing Director and currently the CEO Emeritus of MG Motor India said, “While we have a capacity of 1,20,000 units a year at our existing plant in Halol, it will [be] exhausted soon. Thus, we plan to set up a second plant at the same location with an additional capacity of 180,000 units a year,” adding that the company expects to raise at least Rs 5,000 crore from its stake sale exercise.

Given the growth MG has witnessed, the expansion is a necessity, said Chaba. In FY23, the company sold 48,866 passenger cars—21 per cent more than the 40,369 units sold the previous year and more than double the 21,954 units it sold in FY20, the first full year of operations. Chaba estimated that it will clock sales of over 70,000 units in FY24.

Moreover, in its bid to ‘Indianise’ the company the management also plans to increase local sourcing of components over the next few years. Its indigenisation plan involves complete localisation. “When we say ‘Indianising the operations’ that includes everything—like localising the technology. We are going to assemble the batteries from next year at Halol. A lot of important components like cells that our industry currently imports will be made in India through joint ventures. For instance, we will explore local production of newer technologies like Hydrogen fuel cell that we have access to,” said Chaba.

Further, over the next four years, MG Motor may launch 4-5 new passenger vehicle models - mostly EVs - in the India market, which is expected to take the contribution of EVs to its total sales to over 65 per cent by 2028. Overall, for the new manufacturing plant, expanding local sourcing and new car models it is expected to invest over Rs 5,000 crore.

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