MG Motor under Indian government’s scrutiny over ties with China, EV expansion plans on hold

MG Motor’s plans to scale up its electric vehicle (EV) manufacturing in India have hit a roadblock due to its Chinese ownership links.

JSW MG Motors India, which is owned by China’s SAIC and India’s JSW Group, sought benefits under the government’s production-linked incentive (PLI) scheme.

Now, it is facing delays as an inter-ministerial panel, led by the Union home secretary, is scrutinising its foreign investment proposal, as per a report by the Times of India.

The investigation is part of efforts to ensure compliance with the government’s Press Note 3 policy, which focuses on regulating foreign investments from countries sharing a land border with India.

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MG’s Chinese ownership under review
MG Motor, a subsidiary of Chinese auto giant SAIC, has been grappling with challenges in expanding its Indian operations since the government introduced Press Note 3 in 2020 during the COVID-19 lockdown.

The policy removed automatic approval for foreign investments from Chinese-owned companies, requiring stricter scrutiny even in non-strategic sectors. This change has made it difficult for SAIC to access fresh capital to grow its business in India.

To navigate these hurdles, SAIC restructured its stake in MG Motor India by bringing in local partner JSW Group. Through this new partnership, JSW Group now holds a 35 per cent stake via its Singapore subsidiary.

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Additionally, SAIC diluted 8 per cent equity in favour of an Indian financial investor, 5 per cent was allocated to employees as ESOPs, and 3 per cent was granted to dealers. With these changes, the Chinese ownership in the company has dropped to 49 per cent, while Indian stakeholders now hold a 51 per cent majority.

Petitioning for PLI benefits
The newly restructured joint venture, now called JSW MG Motor India, is urging the government to relax its scrutiny in light of the new ownership structure. The company argues that with Indian entities now holding the majority stake, it should qualify for PLI scheme benefits. It believes that access to these incentives would help offset the high costs associated with EV manufacturing, making its electric cars more affordable for Indian consumers.

JSW MG Motor India has stated that it has obtained all the necessary clearances required to complete the transaction and remains hopeful that the government will approve its request. The company emphasised that support from the PLI scheme would play a crucial role in driving the growth of its EV manufacturing operations.

The inter-ministerial panel is expected to review the revised application soon, but it remains to be seen whether the changes in ownership will be enough to satisfy the government’s concerns about Chinese investments. Approval for PLI benefits could significantly ease the financial burden on the company, helping it accelerate its green vehicle ambitions in India.