SAIC "disarmsed" India?

The bone of the Indian auto market has always been difficult to gnaw, but it still can't stop the enthusiasm of major car companies, and SAIC is no exception.

Not long ago, foreign media reported that India's largest steel giant JSW Group announced that it had reached a cooperation with SAIC MG to jointly establish a joint venture worth $1.5 billion to facilitate the production and sales of MG brand electric vehicles in India. JSW and other Indian partners hold a 51 percent stake in the joint venture, while SAIC Motor holds a 49 percent stake.

After the news was issued, it sparked heated discussions among netizens, and many people believed that SAIC's move was tantamount to "losing power to survive". After all, the "big cake" of the Indian market, which seems to be delicious, has always been nicknamed the "cemetery of foreign capital", which has discouraged many Chinese and foreign investors.

Immediately afterwards, a person close to SAIC revealed that although SAIC is no longer 100% controlled, it does not mean that absolute control has been ceded.

India has taken the initiative to embrace foreign-funded enterprises with open arms, is there a trap behind this?

Behind the 49% stake is more than half of the voting rights

India's investment environment has always been "unfathomable", especially in setting thresholds for foreign investment, which has always been "non-discriminatory", whether it is Chinese enterprises, or enterprises from Europe, the United States, Japan and South Korea, they are all in danger, and similar cases abound.

In January 2020, Great Wall Motor reached an agreement with General Motors to acquire GM's plant in Maharashtra, India, for a consideration of US$300 million, but the agreement was terminated after the expiration of the agreement on June 30, 2022, due to the failure to obtain regulatory approval from India.

For another example, BYD originally planned to invest $1 billion to build a factory in India, but when the project was planned, the Indian government promulgated a new policy - imposing punitive tariffs on imported auto parts.

Judging from past cases, SAIC's development in India has also faced obstacles from the government or policies.

In 2023, there are rumors on the Internet that the Indian government will force SAIC to transfer its equity and transform a 100%-owned wholly-owned enterprise into a joint venture with a 51%-49% ratio of Chinese and Indian shares. India's JSW Group is the main body that took a 51% controlling stake.

After a year of protracted war, SAIC finally made a compromise. This was followed by the incomprehension of the outside world: why did he insist on staying in India at the risk of giving up "51% of the right to speak"?

There may be too much helplessness in this. As early as 2019, the MG brand set up a factory in India, and in terms of market performance, MG sold 56,902 new cars in India in 2023, an increase of 18% year-on-year. Among them, electric vehicles account for about 25% of total sales, making it the second largest electric vehicle manufacturer in India.

In other words, if SAIC does not agree to this equity concession, it will repeat the mistakes of the past, as in the previous list of companies, under multiple pressures from the Indian government, the foundation accumulated over the years has been lost.

However, in response to the outside world's discussion of the "soul theory", the insider also gave an explanation: according to the shareholding ratio, 5% of the employee shares and 3% of the dealers' shares have no voting rights, that is, excluding the 8% non-voting shares, the remaining 92% of the equity owners enjoy 100% of the voting rights, which means that SAIC has obtained more than 50% of the voting rights through 49% of the shares.

Behind SAIC's willingness to hand over MG's equity to the Indian government as a wedding dress is the question of whether the company should gnaw off this "fat meat".

India Investment: Lowering the Threshold to "Catch Big Fish"?

India has always had great ambitions to develop the automotive industry. Earlier, the Indian government made a decision to make electric vehicles account for 30% of total vehicle sales to 1 million units by 2030.

Since 2021, India's Minister of Road Transport and Transport, Nitin Gadkari, has repeatedly and publicly emphasized that "India will become the world's number one car manufacturing hub in the coming years".

On March 19 this year, Piyush Goyal, India's commercial and industrial representative, once again launched a call to invite global companies to invest and build factories in India, and is confident that India will become a "manufacturing center" in the field of global electric vehicles.

However, for the Indian market, Chinese and foreign investors can be described as both loving and hating, loving its immeasurable market potential and hating that there are too many uncontrollable factors behind it.

Since the Modi government came to power, India has imposed tariffs on imported smartphones and electric vehicles, and at the same time lured foreign investment with a "market-for-technology" strategy. Modi has repeatedly emphasized the development of the country's electric vehicle industry, but combined with the development of the local automobile market, it is inseparable from the participation of foreign automakers to achieve the goal.

On March 15, the Indian government introduced a preferential bill that will reduce import duties on electric vehicles: to attract international car companies, including Tesla, to build factories in India.

Prior to the introduction of the new policy, India imposed a high tax on imported electric vehicles, probably between 70% or 100%, depending on the value of their imports. According to the latest policy, as long as foreign companies commit to invest at least US$500 million to start producing electric vehicles in local factories in India within three years, they can obtain tax incentives, and imported electric vehicles priced at US$35,000 or more, enterprises only need to pay 15% tariffs, the time period is 5 years, and the annual quota is 8,000 vehicles.

According to Goyal, the country is inviting electric vehicle manufacturers from all over the world to set up factories in India, "which will create jobs and improve trade." ”

As the world's most populous country and the world's third-largest car market, India will sell only 86,870 electric vehicles in 2023, which has doubled compared to 2022, but the development rate is still slow, with an electric vehicle market share of only 2.3%. This also provides market opportunities for other car companies.

However, although the Indian government has shown favor at this stage, it is difficult for foreign manufacturers to establish a relationship of trust with the Indian government through a series of "unkind" behaviors in the past. As far as the Indian government is concerned, instead of shouting slogans to curry favor with foreign investment, it is better to first implement "legal rights" and then start talking about "money".