MG Motor India’s expansion strategy: Expert sees need to sync long-term commitment of potential stake buyers

With an Indian investor(s) on board, MG Motor India would be in a better position to not only expand manufacturing plans in India, but also steer the company forward.

MG Motor first rollout
File photo: May 2019, MG Motor India commences commercial production of Hector from Gujarat.

MG Motor unveiled its 5-year plan for India recently and the rumour mills are running abuzz about a potential stake sale. This is because as part of its future strategy for India, MG Motor has announced that it will dilute its shareholding with the majority to be owned by Indians in the next 2-4 years.

This is primarily seen as a move to counter one of the key challenges for the company – the ability to get investment from its parent company following the border tension between India and China, which has led to hindrances for Chinese investments in the country. 

“This is one of the unique incidents when an international carmaker that has entered India on its own is going to dilute its majority stake to a local partner(s)/company(s). If a local partner is able to build a domestic ecosystem (technology transfer) with the help of an MNC in a joint venture, it will indeed serve the government of India’s focus on localisation, reduce dependency on foreign products and also promote technology transfer to India,” said Gaurav Vangaal, Associate Director, S&P Global Mobility.

He explained that while the likes of GWM, and other Chinese players couldn’t enter the Indian market due to the geopolitical situation, for the companies who have already entered India and want to continue their plans and expand, it seems like an ideal strategy to look out for local partners.

MG Motor India declined to comment when Financial Express Online reached out to the company.

MG’s India story so far

China’s SAIC-owned MG Motor India has made significant inroads in the Indian passenger vehicles market since it entered the country in 2017. It is no doubt that MG Motor India has been a disruptor in terms of introducing many segment-first features. The big-body aggressive grill design style in its product offering has also led to acceptance in the Indian market.  It has cumulatively sold 1,28,177 vehicles in India with just four products – Hector SUV, Gloster SUV, Astor SUV and ZS e-SUV – with each seeing a different level of success.

The company had taken over the General Motors Halol plant in Gujarat, which initially had a manufacturing capacity of 70,000 units, which has been gradually increased to 1,20,000 units per annum.

MG Comet EV.
MG Motor India is once again is introducing a new concept in the Indian market, with the quirky looking Comet EV.

Now, MG Motor India says it is operating at 100 percent capacity and wants to establish a new manufacturing facility to further increase capacity.  It aims to establish a second plant in Halol Gujarat, which will increase its capacity to 3,00,000 units per annum. 

The average retail price for MG Motor India comes to around Rs 16.5 lakh in March 2023, which is 13.9 percent higher YoY.  

Long-term commitment

Going forward, it aims to introduce 4-5 new cars (mostly EVs). It envisions to achieve upto 75 percent of its total sales in India to come from its electric vehicle offering by 2028.

To support the same, it is exploring the manufacturing of cells and electric vehicle components locally through JV or third-party ecosystems. It also wants to localise hydrogen fuel cells and other latest technologies through joint ventures or with partners.

“MG Motor India has done well in India with its products and has managed to not just grab attention but also gain market share in the segments it has entered. Of the five products it sells in India, the Hector, Astor, and ZS EV SUVs have done quite well. To continue its success and meet the production needs for new cars, especially electric vehicles it will need to set up advanced manufacturing lines. The recent announcement could be a message on their expansion commitment to the Indian market,” added Vangaal.

“The Indian partner(s) who come on board will benefit from the company’s establishment in India, but they just need to be in sync about long-term commitments,” he pointed out.

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.

First published on: 11-05-2023 at 14:03 IST