China's SAIC to drive into space created by GM's exit from India

SAIC to tie up with Morris Garages to set up dedicated manufacturing unit in India, rollout by 2019

Chinese state-owned automotive design and manufacturing company SAIC Motor Corporation Ltd is all set to enter India in partnership with Morris Garages (MG), an iconic British brand that it had acquired in 2008. This announcement comes at a time when US car maker General Motors, a joint venture partner of SAIC in China, has decided to exit India.

Valued at $100 billion, the auto behemoth is slated to become the world's third largest by 2020. SAIC is bullish on the Indian automobile market and would have a dedicated manufacturing facility in the country. Operations are likely to commence in 2019 from a fully-owned manufacturing facility and appointments have already begun at the functional level. It has registered its Indian subsidiary as MG Motor India. A corporate headquarter has been planned in Gurgaon.

SAIC was interested in the Halol factory of General Motors which was shut down by the latter on April 28 this year. As such, SAIC had signed a term sheet to evaluate the Halol plant. However, the company said that the Halol plant deal is subject to submission of all government approvals, settlement of labour and all other pending issues by GM. 

A SAIC statement said, "The Company is in the process of finalising its manufacturing facility and is firming up its product strategy for the Indian market, details of which will be announced at a later stage." P Balendran, executive director of MG Motor India said that they are in talks with the Gujarat government, however, nothing has been finalised yet. "We would make an announcement in this regard soon," he added. 

Sources in the state government indicated that a team from MG Motor visited Gujarat recently and a greenfield plant is being considered there if the Halol deal does not go through. At present, severance packages and transfer options with a few hundred permanent workers who have refused to accept the offer made by GM are being negotiated. "If another car maker acquires this facility, why can't it absorb us?" asked a labourer working at Halol before it shut down. 

For its A-team, MG Motor India has chosen former senior GM employees including Rajeev Chaba and P Balendran. Chaba has been roped in as the president and managing director. He was the managing director of GM India from 2005 to 2007, during which he took up assignments in GM North Africa & Egypt as well as China. Prior to his this appointment, Chaba served as the global COO in Vanguard Logistics, US and as an operating partner of ManCapital, a UK based private equity firm. Balendran too has worked in senior positions for GM India.

The choice of Morris Garages as a partner for its India entry is a strategic move, analysts say. “The introduction of the iconic British Sports Car Brand ‘MG' in India is an important part of SAIC Motor’s global strategy," a company statement said. 

MG originated as an iconic British racing sports company in 1924, evolving into a modern-day innovative brand through the last 93 years. 

MG has had associations with India since pre-independence times. Set up in 1930 in Abingdon, UK, the MG Car Club has more than a million fans, making it by far one of the world's largest clubs for a single brand. MG products, designed and engineered at its European & Global Design Centers, will now be manufactured in India too. 

"SAIC is already operating through the MG brand in other countries, including Asian markets. The response has been good. Also, the brand has an India connection," Balendran explained.

SAIC Motor is already present across the UK, the US, Europe, Australia, New Zealand, South America, the Middle East, South East Asia, Thailand and Indonesia. SAIC Motor has a diversified portfolio of cars— hatchbacks, sedans, multi-utility vehicles, sports utility vehicles, hybrids and even electric cars.

Balendran did not wish to comment on the debut model choice for MG Motor India. "We are in the process of finalising our product plan. We plan to start production by 2019," he said. 

Speculations are rife that the company might choose to enter with SUVs, the fastest growing segment of the Indian automobile industry. 

While sales of passenger vehicles grew 9 per cent in FY17 to cross 3 million units, sales of utility vehicles were up 30 per cent. In comparison, passenger cars grew 3.85 per cent. 

A Mumbai-based analyst noted, "While SUVs are likely to grow during FY18 as well, the market dynamics can change by the time MG Motor India is ready for its product launch in FY20. When planning its product portfolio, the company has to keep these nuances in mind."