MG Motor has had a decent run in India so far. Can Sajjan Jindal take it to the next level?

“Together, SAIC and JSW Group will work towards creating a smart and sustainable automotive ecosystem in India by bolstering the development of NEVs and ICEs with carbon neutrality, sustainability, and green mobility at the centre of its shared vision,” the press statement said. “Both JV partners are committed to continue staying invested in the Indian market with a vision towards achieving sustainable growth.”

The investment from JSW is a long rope for MG Motor, which has been struggling with raising additional funds for expansion in India, especially due to closer scrutiny of Chinese investments.  

“The automobile business is a global industry, and like in any other similar industry, access and collaboration are crucial for its healthy growth,” Wang Xiaoqiu, president of SAIC Motor said. “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.”

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What does this deal mean?  

For JSW, which has been on a diversification plan, especially with Sajjan Jindal’s son Parth Jindal at the helm, the new partnership allows foraying into one of the most sought-after sectors in the automotive world.

While the valuation of the deal is still unclear, MG Motor India has seen a 25 percent year-on-year growth and invested over Rs 7,000 crore in the company. So far, the company has sold close to 2,00,000 units, with five vehicles in the country. Of this, the company’s ZS EV and Comet are electric models.

“Our strategic collaboration with SAIC Motor aims to grow and transform the MG Motor operations in India with a focus on green mobility solutions,” Parth Jindal, the managing director of JSW Cements and JSW Paints, said in a statement.

“This is a win-win scenario for both parties as the development is expected to accelerate the growth and transformation of MG Motor in India,” Harshvardhan Sharma, the head of auto retail practice at Nomura Research Institute, tells Forbes India. “JSW’s conglomerate acumen coupled with MG Motor’s already successful venture in India backed by SAIC’s behemoth global presence is a good match. Together they can look at NEVs and ICEs with Carbon Neutrality, Sustainability, and Green Mobility at the centre of their shared vision.”

Apart from BYD, and MG Motor, India currently does not have any Chinese automakers in the electric car segment. Geopolitical tensions between the countries have meant that many Chinese automakers who had made plans to foray into India are now stuck. Even BYD’s plan to spend $1 billion in capital expansion had to be shelved after opposition from the Indian government, according to reports.

Mr. Rajeev Chaba (CEO Emeritus, MG Motor India), Mr. Wang Xiaoqiu (President, SAIC Motor), Mr. Chen Hong (Chairman, SAIC Motor), Mr. Sajjan Jindal (Chairman, JSW Group), Mr. Parth Jindal (JSW Group), Mr. Seshagiri Rao (CFO, JSW Group)

“The joint venture paves the way for bringing world-class technology-enabled futuristics suite of automobile products including the new generation of intelligent connected NEVs and ICE vehicles,” Jindal 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. One of the key focus areas of this joint venture will be to pursue the development of the EV ecosystem and to take a leadership position in this space.”

“From a Jindal point of view, this is in line with their diversification and getting into newer business,” Puneet Gupta, director for automotive forecasting at market research firm S&P Global Mobility says.” MG is a perfect brand that has seen phenomenal growth but needs capital. For JSW this deal shortens their timeline as far as vehicles are concerned, and helps to ramp up on multiple offerings.”

Over the past few years, India’s electric vehicle segment has seen some serious traction, with both homegrown and foreign automakers making a beeline with their models. Globally, automakers ranging from GM to BMW and Ford are expected to spend over $500 billion in developing all-electric vehicles from gasoline models over the next several years.   

In India, automakers from Tata to Mahindra have taken the plunge to develop their models as the government looks to have 30 percent of all vehicles sold in the country to be electric by 2030. Currently, Tata Motors sells over 6,500 units of electric vehicles every month in the country. By 2030, about 40 to 45 percent of all two-wheelers and 15 to 20 percent of all four-wheelers (passenger vehicles) sold in India will be electric, according to a report by Bain & Co, while the government wants EV penetration to hit 40 percent for buses, 30 percent for private cars, 70 percent for commercial vehicles, and 80 percent for two-wheelers.

Still, affordability remains a key constraint when it comes to mass adoption in a market that’s well-known for being price-sensitive. Currently, electric vehicles from Kia, Mercedes, BMW, and Hyundai, among others, position themselves at a higher price point, making them less accessible to a broader consumer base.   

Of the 48,000 electric vehicles sold in the first half of 2022, Tata Motors sold as many as 34,000 units, contributing to as much as 72 percent of the market according to Singapore headquartered market research firm Canalys. Tata Motors is followed by MG Motor and Mahindra, which sold around 5,000 vehicles and 4,300 units during that period. The Tata Tiago was the country’s highest-selling electric vehicle, followed by Tata Nexon and Tata Tigor.

“The Indian auto landscape is undergoing a tectonic shift with technology being at the forefront of it,” adds Sharma. “The future of mobility is going be on sustainable powertrains and software defined vehicles. With a focus on advanced cell chemistry and battery net localisation, EV value chain autonomy can be achieved. Furthermore, for achieving net zero all powertrains have to work in tandem, there’s room for hybrids, ICEs, EVs, CNG, FCEV and H2-ICE.” 

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What does it mean for MG Motor?   

For MG Motor, the deal with JSW opens up an avenue to strengthen its domestic presence, especially in the face of concerns regarding its Chinese connections.

“Today, the Indian consumer does not care about the country of origin of a vehicle,” Rajeev Chaba, president and managing director, MG Motor India, had told Forbes India earlier. “They believe in value for money and are happy as long as their needs are fulfilled. Besides, the automobile industry is a global one, with parts being sourced from many places, and therefore a company isn’t specific to one region alone.”

In 2017, MG Motor India had taken over a manufacturing facility previously owned by General Motors in Halol, Gujarat, after the American car maker decided to call it quits in the Indian market due to floundering sales. The company spent over Rs 2,200 crore on the acquisition of the facility and expanding its capacity.

Since then, through its products including Hector, Aster, Gloster, ZS and Comet, MG has managed to cement itself into the domestic automobile market, where the likes of Ford and General Motors have failed. “It was able to enter a relatively crowded market, establish a good ‘Product Market Fit’ with its portfolio, and was able to work cohesively with all stakeholders,” says Sharma. “Hector is a flagship in itself.”

But, closer scrutiny by the Indian government on Chinese automakers has meant that expansion plans have been severely hit. In 2022, the Indian government began a probe into financial irregularities at MG Motor and a few months later, MG Motor said that it was looking to sell its stake to fund expansion plans.  

“JSW is a formidable partner,” adds Sharma of Nomura. “Being a large conglomerate, they understand and own a lot of upstream capabilities themselves and there could be backward integration synergies in play. Besides their acumen across the value chain in India and a strong focus on building shareholder value is going to be a shot in the arm for the partnership.”

Meanwhile, JSW’s foray into the automobile market comes at a time when the world’s most valuable automaker, Tesla, is planning its entry into India. Tesla is expected to build a sub $20,000 electric vehicle, and the Indian market, with its cheaper workforce and a production-linked incentive from the government, could help hasten that.  

For long, Musk himself has been advocating a sub-$30,000 (Rs 24.5 lakh) electric vehicle, but even the cheapest Tesla costs as much as $39,000 (Rs 32 lakh) in the US. Over the past few months though, Tesla has been taking the fight to other automakers in the US with a series of price cuts, on the back of its position as a cost leader.   

“There’s a lot of value and capability building which is happening in India thanks to Atmanirbhar vision,” adds Sharma. “While Tesla is a formidable player globally, for India maybe a price point rejig would be essential for them, given that the EV market is growing fast and the scale is in the sub-20 lakh market.”  

It only adds up that India’s electric vehicle (EV) market is expected to have a compound annual growth rate (CAGR) of 90 percent in this decade to touch $150 billion by 2030. “Jindals are also talking about the supply chain,” says Gupta. “That means battery manufacturing and charging infrastructure. I assume the eventual goal is to work across the electric ecosystem and build on that, especially at this time of transition.”

All that means if JSW’s pedigree is anything to go by, India’s automobile market is in for a serious shake-up.