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SAIC has already started the first phase of its ‘Indianization’ effort in MG by inducting JSW Group as a partner. New Delhi: As India and China attempt to resolve the border issue and iron out differences in the process, it remains to be seen what impact it could have, especially when it comes to new investments in the automobile sector.
When the border skirmish first broke out in 2020, one of the most significant casualties was Great Wall Motors, which had earlier announced with much fanfare that it had bought a General Motors plant near Pune. This followed an impressive display of its SUV lineup at the Delhi Auto Expo and set the stage for the next entry of a Chinese automaker after SAIC Motor Corp, which faced its India journey with the MG brand.
Against this happy backdrop was the horrifying form of Covid, then called the Wuhan virus, which was already wreaking havoc in parts of Europe and China. The lockdown was imposed a few weeks after the Auto Expo, bringing the Indian economy to a standstill, but what made matters worse was when the Chinese Army decided to take an aggressive role towards Ladakh.
In the last four years since this happened, relations between the two countries have only deteriorated, while China has recently re-emerged as India’s largest trading partner. Even though the Center has called for a self-reliant India – which can be roughly translated as self-reliance – the actual reality appears to be something else from the trade data, where India imported over USD 100 billion from China in the last financial year. While it is just one US dollar. 17 billion worth of exports from our side.
Rewind to Great Wall Motors
Over the past four years Great Wall Motors has finally rescinded its offer to acquire the GM facility which is now in Hyundai Motor India’s portfolio. The Chinese SUV brand waited for almost two years, but when it became clear that the Center was not going ahead with it, it postponed it for a day and instead looked at Brazil and Thailand as potential markets. Decided.
Similarly, Changan Automobile was also keen to enter India, but the aggressive tactics of the Chinese military scuppered these plans. The company was looking at locations in Tamil Nadu, Andhra Pradesh and Telangana and reports also revealed that it was exploring the possibility of setting up a Ford plant near Chennai. Ultimately, he decided to leave everything behind and focus on ASEAN when it became very clear that there is no love affair between India and China.
So what does the latest round of rapprochement show at the BRICS summit in Russia? As a top industry executive told ETAuto, “It would be naive to assume that everything is back to square one. China is not going to make things easy for India and will try to increase its dominance again. Undoubtedly, the Center will be aware of this and hence will take it one step at a time rather than getting into a premature celebratory mood.
However, it cannot be denied that China will see India as a potentially huge market for its electric vehicles where it is currently the king of all its surveys. There is no rival in the US or Europe to take on top Chinese brands like BYD (which has a facility near Chennai) and many others that are literally making waves in the EV sector.
BYD is moving forward rapidly
The attractive mix of top-class features at a competitive price tag was irresistible to potential buyers. BYD has now reached the top spot in China and has overtaken traditionally strong players like Volkswagen and General Motors, who till then were having a heyday with their ICE (Internal Combustion Engine) offerings. But China wanted more and now the time has come for its automakers to pursue new geographies with more aggression.
When China decided to go global with its own range of EV brands and wasted little time in imposing hefty tariffs to prevent easy entry, both Europe and the US were left badly shaken. Some European carmakers warned their governments that this would be counterproductive, especially as they were betting big on a mass market and could face serious retaliation in the process. Ironically, some of Europe’s smaller countries have rolled out the red carpet for Chinese investment in EVs, which has only exposed political divisions within the EU.
Undaunted, Chinese EV makers are now moving ahead with their global plans and have targeted ASEAN and Latin America as additional bases. At present, India is outside its limits and it will be interesting to see how things will be in the coming months. Industry sources say the Center will remain as cautious as ever and will not ease entry barriers unless several conditions are met.
“We believe that India will have strict regulations related to optimal utilization of the local supplier base rather than allowing Chinese imports to go completely out of control. The government can also push for partnerships with Indian companies,” he says.
Some investment proposals may get the green light, as was the case with BYD, whose initial plans were turned down. The company is keen to expand its electric range in India and has already made a fair start with the Atto 3, eMax 7 and Seal. However, bigger figures can come only when manufacturing is ramped up which will require new investments. BYD is ready and now it remains to be seen whether the Center is willing to support the endeavour.
Local Partnership for India
SAIC has already started the first phase of its ‘Indianization’ effort in MG by inducting JSW Group as a partner. This was the only way she could consider further investment, especially when it was quite clear that she could not do so on her own. Similarly, BYD may need to look at a suitable partner for the next phase of its growth and speculation is already rife in the market that it could be Adani where the fusion of new energy needs and EV manufacturing fits well. Will Work.
It’s still early days and the door to Chinese investment in EVs is not going to open anytime soon. Local manufacturers will also put forth their point before the Center that they need to stay away from any price war with Chinese brands. After all, companies like Tata Motors, Mahindra & Mahindra, Hyundai and JSW MG have their own plans for which the investment has been made.
The latest Economic Survey had clearly indicated that inviting Chinese investment is justified only because India cannot afford to be isolated from the global supply chain. The logic was that goods could be produced here and then exported which could be a win-win situation for all concerned. However, some voices within the government made it clear that this would not happen – but all this was before the BRICS summit and the announcement of “friendly relations”.
A top CEO of an auto component company recently told this writer that from the auto sector perspective, there is a geopolitical issue with China which “we fully accept and support”. He also mentioned the emergence of a “Global South” that India needs to take advantage of and yet be careful in how it engages with other countries, including China.
accepting reality
“But when I look at it purely from a trade and economics point of view, we have to respect that China is the world’s largest producer and market and is very ahead from a new technology point of view. If it is not a geopolitical or security-sensitive issue, you should at least engage with China on its own terms in some areas to help the ecosystem flourish globally. Competitors want access to the value chain,” he said. CEO.
According to him, there are a large number of startups in India which will also have a role in this direction. “”We need to use this entrepreneurial spirit to move faster with some of these more established economies in the automotive sector…try to adopt that technology and build on it for the Indian market,” he explained.
“For us, as long as FDI is supporting Indian localized manufacturing and you tick the right boxes in terms of zero security risk, there should be some engagement (with China). India is also a strongly emerging growth market and China cannot ignore it,” the CEO signed off.
To learn more about the electric vehicle ecosystem and meet key industry leaders, Click here.
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