Sajjan Jindal, the chairman of the JSW Group, is likely to acquire up to 48% of MG Motor India, a wholly-owned subsidiary of the Chinese automaker SAIC Motor. The deal, still in the works, would make MG Motor India an Indian company with Jindal as the majority shareholder.
MG Motor
The deal is reportedly being supported by the Indian government, which is keen to promote domestic manufacturing and reduce the country’s reliance on imported cars. MG Motor India has been a relatively successful player in the Indian market, selling over 100,000 units since its launch in 2019. The company offers a range of SUVs and electric vehicles, including the Hector, Gloster, and ZS EV.
The deal
If the deal goes through, it would be the latest in a series of investments by Indian industrialists in the automotive sector. In recent years, several Indian companies, including Tata Motors, Mahindra & Mahindra, and Hero MotoCorp, have made significant investments in new product development and manufacturing capacity.
The growing investment in the automotive sector is a positive sign for the Indian economy. The industry is a major employer contributing significantly to the country’s GDP. The government’s support for the sector is also a welcome development, as it will help to boost domestic manufacturing and create jobs.
Here are some of the potential benefits of the deal:
- It would make MG Motor India an Indian company, giving it access to government incentives and support.
- It would give Jindal a foothold in the growing Indian automotive market.
- It would help to boost domestic manufacturing and create jobs.
However, there are also some potential risks associated with the deal:
- It could lead to increased competition in the Indian automotive market.
- It could lead to job losses at SAIC Motor.
- It could be seen as a sign of Chinese economic dominance in India.
What is the valuation of MG Motors?
As of June 2023, MG Motors is valued at $1.2-1.5 billion (Rs 9,800-12,300 crores). This is a far cry from the original ask of $8-10 billion, which potential investors reportedly rejected. The company’s valuation has been declining due to factors including the ongoing chip shortage, the Russia-Ukraine war, and rising inflation.
Despite these challenges, MG Motors has continued to grow its market share in India. In the first five months of 2023, the company sold over 30,000 vehicles, making it the sixth-largest automaker in the country. MG Motors also plans to launch several new electric vehicles in India in the coming years. These factors could help the company to boost its valuation in the future.
Here are some of the reasons why MG Motors’ valuation has declined:
- Chip shortage: The global chip shortage has disrupted production for automakers worldwide, including MG Motors. This has led to lower sales and profits for the company.
- Russia-Ukraine war: The Russia-Ukraine war has also harmed MG Motors. The war has caused supply chain disruptions and increased inflation, making it more expensive for the company to manufacture and sell its vehicles.
- Rising inflation: Rising inflation has also made it more expensive for consumers to buy cars. This has led to lower demand for MG Motors’ vehicles.
Despite these challenges, MG Motors has continued to grow its market share in India. In the first five months of 2023, the company sold over 30,000 vehicles, making it the sixth-largest automaker in the country. MG Motors also plans to launch several new electric vehicles in India in the coming years. These factors could help the company to boost its valuation in the future.
Conclusion
The deal can potentially be a positive development for the Indian automotive sector. However, weighing the potential benefits and risks before making a judgment is essential.
