SAIC Motor, one of China’s biggest state-controlled auto manufacturers, looks to significantly reduce its current 49% stake in its Indian joint venture with India’s JSW Group, Reuters reported on Thursday, quoting sources with knowledge of the plans.
SAIC and Indian conglomerate JSW Group have created the JSW MG Motor joint venture “to capitalise on the significant opportunities emerging in the fast-evolving Indian automotive sector.”
However, the joint venture hasn’t delivered on the Chinese auto giant’s expectations, according to Reuters sources.
That’s why SAIC has decided to slash its 49% stake and halt further investments in the Indian joint venture, the sources added.
A key reason for the decision is India’s restrictions on investments from neighboring countries enacted in April 2020.
Back then, India restricted investment coming from any country which shares a land border with India – Afghanistan, Bangladesh, Bhutan, China, Myanmar, Nepal, and Pakistan – to curb “opportunistic takeovers/acquisitions of Indian companies due to the current COVID-19 pandemic.”
The India-China relations have been tense in recent years, including skirmishes on the border in 2020 and 2021.
Earlier this month, Indian Prime Minister Narendra Modi visited China for the first time in seven years for a high-profile summit with Russia to send a message of a new world order. Modi and Chinese leader Xi Jinping said India and China are partners, not rivals.
However, this rapprochement has yet to be seen in business ties.
China has eased its restrictions on exports of rare earth elements by approving “a certain number” of export licenses. Some shipments of rare earths and magnets, critical for auto manufacturing, to European countries and the United States have resumed. But not to India.
No Indian company has received yet approval from China to import rare earth magnets from the world’s dominant supplier. This has left Indian carmakers scrambling to design electric vehicles (EVs) that do not use rare earth elements.
By Tsvetana Paraskova for Oilprice.com
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