Didn't spend a penny, but made 300 million? SAIC responded to the control of the Indian joint venture

Recently, the news that SAIC Motor lost a controlling stake in a joint venture in India went viral. The idea is that SAIC and Indian steel giant JSW have formed a joint venture to produce MG electric vehicles. Unexpectedly, before these eight characters were skimmed, the company was directly robbed by the Indians. SAIC only has 49% of the shares left, which belongs to the share that is being handled.

Given the reputation of Indians, it seems "reasonable" to do such a thing. And SAIC is the identity of a state-owned enterprise, and netizens are even more indignant.

In this regard, SAIC made a positive reply, and the core is two points. The first is that SAIC has not lost control of the joint venture, and the second is that SAIC has not lost money in this business, but has made money. Subsequently, India's JSW also announced the establishment of a joint venture with SAIC, JSW MG Motor India.

What's going on with SAIC's joint venture in India? Let Kung Fu Motors take you to take a look.

(1) The logic of joint ventures is two-way running?

In 2017, SAIC Motor established MG India in India. Subsequently, SAIC acquired GM's Harol plant in India and began "Indian drifting". In 2019, the MG Haror plant was officially put into operation, and in the next four years, SAIC's business in India is also growing, with sales of nearly 60,000 units in 2023.

It was also at this time that SAIC India was taken a fancy to, and this was the case of the joint venture later.

For SAIC, the joint venture is undoubtedly a matter of both advantages and disadvantages. Although MG's business in India is booming, it has only achieved a volume of 60,000 vehicles in four years. As a new brand, this is a good result, but for SAIC's size, the benefits are really minimal. In this case, finding a local business joint venture is definitely a good choice.

You must know that the first joint venture in China was jointly established by SAIC and Volkswagen. As we all know, Volkswagen has dominated the domestic auto market for more than 30 years, so SAIC is very clear about the benefits of joint ventures.

To take the simplest example, BYD has also built a factory in India to produce electric buses. However, BYD's factory is only an assembly plant, and the parts are still imported from China, for which India has imposed punitive tariffs on imported auto parts, which has also directly affected BYD's profits in the Indian market. After the joint venture, this situation can be avoided, and the local partner will try to remove some policy obstacles.

For the Indian JSW Group, it is undoubtedly fortunate to have a joint venture partner like SAIC. In particular, SAIC's technology accumulation in the field of new energy is the most important thing for JSW Group. India wants to get SAIC's technology, and SAIC also wants to drive local new energy vehicle consumption (the current penetration rate of new energy vehicles in India is only 2%), and the two actually have their own needs.

SAIC India can get better development, and JSW Group can also get a piece of the pie, and this result is actually very happy for both parties.

(2) "Excess" recovery of investment, SAIC's risk management and control

Then there is the issue that everyone is most concerned about, the right to speak in the new joint venture. The original MG company in India, SAIC does have a 100% controlling stake. After the joint venture, SAIC Motor only has a controlling stake of 49%. This is actually related to local laws, and the proportion of foreign investment in domestic joint ventures is actually less than 50%.

The difference is that SAIC has made a small tip on this 49% stake.

In the new joint venture, SAIC is the largest shareholder with a 49% stake. Then there is JSW with a 35% stake, a local financial institution with an 8% stake, an employee stake 5%, and a dealer with a 3% stake. At first glance, it seems that SAIC's shareholding ratio is indeed less than 50%, and there is a risk of losing control of the company.

But in fact, in this shareholding structure, 5% of employee ownership and 3% of dealer ownership have no voting rights. In other words, SAIC's 49% stake and 53.26% voting rights still firmly hold control of the new company.

Of course, I personally think it makes sense that the Indian side does not insist on control. Domestic joint ventures have also made countless plans, but in the end, almost without exception, foreign capital has the final say, not because people have more equity, but because the technology is in the hands of others, and it is not okay not to bow down. I am afraid that India has figured it out directly this time, and this result can be regarded as an explanation from both sides.

And SAIC's 51% stake is not sold in vain, after entering the Indian market for so many years, SAIC has invested a total of 3.2 billion yuan in the local area, of course, the majority of which is the construction and renovation of the factory. Through this equity dilution, SAIC Motor got back 3.5 billion yuan in one fell swoop. In other words, SAIC has invested in India over the years, earned back 300 million, and then has a 49% stake in a promising company. From that point of view, this should be a good business.

Of course, the Indian market has always been full of uncertainties, and there have been many things with low floors, and it is unclear what the future holds. Including SAIC's acquisition of MG back then, in fact, not many people are optimistic, but now it is SAIC's trump card.

The overall risk is controllable, and there is enough prospect, it is worth a try. At least SAIC and Chery went overseas early, and now the annual sales of hundreds of thousands of overseas vehicles are broken out little by little.

(3) Combining the best of both worlds to give strength to Suzuki?

In addition, SAIC is probably one of the most suitable companies in the country for India, as it has a large number of products suitable for Indian consumers.

First of all, of course, the MG brand itself, India belongs to the Commonwealth of Nations, and MG is a British brand, which has its own star effect in the local area.

Based on previous experience, once the MG brand is fully developed, the potential in Commonwealth countries is very large, both in Australia and Canada. MG Motor has sold 56,902 units in India, with more than 4,000 units sold monthly, indicating that the local recognition of the brand is already quite good.

In addition, SAIC Motor has a large number of models suitable for introduction to India. Models like Hongguang MINI EV, Wuling Starlight, and Baojun Yunduo are likely to be big kills when they are taken in the past.

The best-selling brand in India is Suzuki, which focuses on fuel efficiency, peace of mind, and low entry barriers. SAIC's electric car has a lower entry threshold, which is more cost-effective and equally worry-free. Once this market is developed, it may be in the volume of five million per year.

In addition, you can consider moving some old production capacity and production lines over. For example, SAIC once had a magic car Baojun 530, which was once among the best in sales, and even once picked off the Haval H6, the main thing is leather, large space, and high cost performance. However, due to the upgrading of domestic consumption, this god car is slowly lonely. Now the technology and drawings are still there, and if they are produced in the Indian market, they may not be able to make any waves.

Don't forget, the first car introduced by SAIC Volkswagen that year, the Santana, was actually a product of the previous generation of Volkswagen, but it did not prevent it from selling well.

(4) Kung Fu shooting

Criticism is always the easiest, and any big move by car companies today is often very controversial. Once done wrong, word-of-mouth can easily become problematic. But if you don't work hard to break the game, it will be a slow death for many car companies.

SAIC Motor has published the "soul theory" before, in fact, such a view was the mainstream at that time, but SAIC said it. Moreover, practice has also proved that there were many car companies that cooperated with Huawei at that time, and it was only Cialis that made a lot of money in the end. Today's situation has changed a lot, and it is really inappropriate to use the sword of that time to behead the current officials.

The same is true for joint ventures in India, which may have great benefits, or it may indeed be a return to the capital, and exploration is a price, or should we give more respect to car companies that strive to expand their living space.