In a recent development, Indian automaker Mahindra & Mahindra and China’s Shaanxi Automobile Group have reportedly agreed to establish a $3 billion joint venture aimed at constructing a car manufacturing plant in India. The proposed venture is set to be primarily owned by Mahindra and is planned to be located in the state of Gujarat, which is the hometown of Prime Minister Narendra Modi.
Following the initial report, Mahindra issued a statement dismissing the claims as “unfounded” and asserting that there is no truth to the matter. Despite this contradiction, Mahindra’s stock witnessed a notable increase, with share prices rising by 3.1% before finally settling at 2.5% higher on the Bombay Stock Exchange.
The joint venture proposes the establishment of an export-oriented manufacturing hub that will focus on producing assembled cars, engines, and car batteries. Mahindra has reportedly sought approval from the Indian government for the Chinese investment, highlighting the need for official clearance due to stringent regulations on Chinese investments introduced by New Delhi in 2020.
Indian government authorization is a prerequisite for any Chinese investment in the country, following heightened scrutiny on such transactions after deadly border conflicts between India and China. The government’s cautious approach has led to the delay or cancellation of numerous investment projects involving Chinese companies like BYD Co Ltd, Great Wall Motor, and SAIC’s MG Motor.
Despite the historical resistance to Chinese investments, India is currently considering relaxing restrictions on non-sensitive sectors such as solar panels and battery manufacturing, where Chinese expertise could potentially benefit the country. The recent statements from top Indian officials, including Finance Minister Nirmala Sitharaman, indicate a willingness to reevaluate the stance on Chinese investments to stimulate exports and bolster economic growth.
The proposed $3 billion joint venture between Mahindra & Mahindra and Shaanxi Automobile Group represents a significant opportunity for collaboration in the automotive industry. As the Indian government navigates the complexities of foreign investments, particularly from China, the outcome of this venture could have far-reaching implications for the automotive sector in India and beyond.