What Sajjan Jindal’s ride on MG Motor means ?

Sajjan Jindal s JSW Group buying a 35% stake in MG Motor India is a win-win deal for both. MG Motor India is a British brand owned by China’s SAIC. The company had a good start with the launch of its first product SUV Hector in 2019. Though it has a minuscule share in India’s auto market, its position in the electric vehicle (EV) segment is promising for growth.
Jindal, who has been trying to get into India’s auto market with an eye on green mobility, has found a good match in MG Motor which has been looking to dilute its shareholding to “Indianise’ the company and raise funds for expansion. While India’s steel magnate Jindal’s entry into the auto sector will boost competition, MG Motor will have more money to fund its expansion and innovation drive, aiming to get ahead in the EV car segment while the giants are still behind.

A speeding automaker going low on fuel

While MG Motor’s cars have found success with Indian consumers, the company’s proposal to bring more capital into India from its parent to scale operations had reportedly run into a roadblock. That’s when the company had charted out ambitious growth plans.

MG Motor India – which has on offer five vehicles in the local market currently – is targeting doubling its product portfolio by 2028. The company plans to launch four-five new cars, mostly EV models, and achieve 65-75% of its sales from the EV portfolio by 2028. More immediately, MG Motor India is looking at profitably growing sales to 80,000-100,000 units this calendar year, from 48,000 in 2022. As part of its growth plan, MG Motor India plans to invest Rs.5,000 crore, which will be utilised, among others, to establish a second manufacturing facility in Gujarat. The new unit is intended to more than double the company’s installed capacity to a total of 300,000 units, from the current 120,000 units.

The company is fortifying its pan-India presence from the current 330 touchpoints in 158 cities to 400 in 270 cities by December 2023.

China’s SAIC entered India through MG Motor in 2019 with a committed investment of Rs.4,500 crore. The company has put in Rs.3,200 crore so far but funds are held up due to increased regulation. Its plans to expand its footprint in India hit a roadblock with the government holding onto approvals on investments from China amid geopolitical tensions. The automaker has been waiting for government approvals for nearly two years and had to eventually explore alternate options to capitalise its expansion plans, ET has reported.

The Indian government had heightened scrutiny on direct investments from countries sharing a land border with India at the peak of the Covid-19 pandemic in 2020. MG Motor has been awaiting approvals for around two years now and has started looking for alternative sources of capital, including from capital investors, ET reported in July last year. The Ministry of Corporate Affairs (MCA) had asked MG Motor India to explain certain alleged irregularities in its books, people familiar with the development told ET back in November last year. The MCA, through its Registrar of Companies, had summoned the company’s directors and its auditor Deloitte to explain certain alleged audit deficiencies that had been discovered during the course of the probe.

Jindal will bring much-needed liquidity to the automaker, thus fuelling MG Motor’s growth plans and giving it more muscle to fight it out with bigger competitors. Jindal’s money would provide MG Motor with medium-term capital to scale up operations. Also, the potential exit of private equity investors in the next few years could lead to local listing on the bourses.The EV play
India’s nascent EV market is dominated by Tata Motors, whose best-selling Nexon EV starts at Rs.14.74 Lakh, followed by MG Motor whose ZS EV starts at Rs. 22.88 lakh.

Tata Motors leads the EV car market with a share of 72%, followed by MG Motor with a share of 10.8 per cent and Mahindra at 9 per cent, according to Canalys.This fragmentation in India’s auto industry has led to different companies emerging as leaders in different segments. Tata Motors, followed by MG Motor, leads in EVs; Toyota Kirloskar and Maruti Suzuki performed best with strong hybrids; and Maruti Suzuki in CNG and internal combustion engine vehicles.

The first electric car from Maruti Suzuki, the country’s top carmaker, is only expected in the next financial year. Volkswagen, Skoda, Renault and Nissan are among companies who are still to launch EVs in India. MG Motor’s second position among EV car makers promises it a space to grow.MG Motor’s EV journey started in 2019 with the unveiling of ZS EV followed by actual sales a year later. It has already crossed more than 10,000 unit sales. “Our vehicle price is on the higher side, that is at Rs.23 lakh and Rs.27 lakh. So at that price point, to be able to really hit 10,000 car sales is definitely an accomplishment,” Deputy MD Gaurav Gupta had told ET in July.

In April this year, MG Motor launched its latest model Comet at an introductory price of Rs.7.98 lakh (ex-showroom), making it the most affordable electric car in the country. It is the company’s second electric vehicle model after the ZS EV. Developed at an investment of Rs.700-800 crore, the MG Comet has localization levels above 50%. The company has worked hard to deepen localization levels to keep prices competitive. It aims to increase the vehicle’s local content to 60% by the year end. The company expects about 30% of its sales to come from the two EVs this year.

To keep prices competitive and support the widespread adoption of EVs, MG Motor plans to deepen local manufacturing of components and establish a battery assembly unit in Gujarat. Plans are also being considered to explore possibilities for hydrogen fuel cell technology vehicles, which are likely to become more affordable in the next three-four years.

Flush with Jindal’s money (the stake sale amount is undisclosed), MG Motor will aim to boost innovation with help from its Chinese parent SAIC, whose SAIC-GM-Wuling is one of the top EV makers in China. The MG Comet is a rebranded version of the Chinese parents’s Wuling Air EV, a top-selling car in China. The Chinese auto major will continue supporting the joint venture with advanced technology and products to deliver mobility solutions to the Indian consumer.

JSW Group’s Parth Jindal said, “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.” When a company backed by a giant parent with a proven track record in making EVs gets much-needed cash, it can surely expect accelerating growth. Source : ET, Times 1 December 2023