By Aditi Shah and Neha Arora
NEW DELHI (Reuters) -China’s SAIC Motor will slash its 49% stake in its Indian joint venture and halt further investment, five people said, the latest sign of how political tension between the Asian neighbours is spilling over into business.
SAIC’s decision comes after India introduced limits on investment from its neighbours in 2020, a move widely seen as being aimed at China. Friction between the two nations intensified after a border standoff that same year.
To try and grow in India, SAIC, one of China’s largest state-owned auto companies, opted to tie up with local conglomerate JSW Group.
Indian and Chinese leaders met last month to ease relations, raising hope of improved business ties. There has since been little sign of progress, with Indian auto firms, for instance, still awaiting Chinese approval to buy rare earths from China.
The tie-up with JSW was meant to inject funds into the automaker’s largest production base outside of China and also ease regulatory hurdles. But it has not delivered, said one of the people. All five of the people familiar with the matter declined to be identified because they weren’t authorised to speak publicly about it.
SAIC is not pulling out of India but wants to dilute its stake in JSW MG Motor significantly and will continue to provide technology and products for the venture, said a second person.
JSW has offered to purchase most of SAIC’s stake to become the single largest shareholder, but the two sides disagree on valuation, with the Chinese carmaker seeking a higher price, the person said, adding that talks are ongoing.
SAIC, JSW and JSW MG Motor did not respond to requests for comment.
STALLED INVESTMENT PROPOSALS
The friction between the two companies is not all down to politics.
JSW also appears to have irked its partner by pursuing talks with rival Chinese firm Chery Automobile to build cars in India, three of the people said.
JSW has long wanted to sell cars under its own brand and talks are at an advanced stage with Chery for a technology, not equity, partnership for cars JSW will build in India, said one of the people.
Chery did not respond to a request for comment.
India, the world’s third-largest auto market, is increasingly positioning itself as a production hub for the industry. Japan’s Suzuki Motor, the dominant player in India, plans to invest some $8 billion there over the next five to six years and make the country its global production base for electric cars.
SAIC entered India in 2019 under its MG Motor brand with plans to invest more than $650 million. It took over a former General Motors factory in western Gujarat state with an annual production capacity of about 120,000 cars.
