The Chinese auto maker is also firming up plans to set up manufacturing operations in India, expected to become the world’s third largest market by 2020.
MG Motor, the UK brand owned by state-run SAIC, is exploring all options for setting up a manufacturing plant in India, the people mentioned above said, declining to be identified.
While the firm is in talks to acquire General Motors Corp.’s India facility in Halol, Gujarat, it is also considering setting up a greenfield facility in the state. A team of SAIC executives is in India to firm up the plans, the first person said.
Rajeev Chhaba, a member of the MG Motor India board, to be named chief executive later this year, declined to comment. “At this stage, I cannot confirm or deny anything," he said.
“The team is to here to get a tighter grip on the Indian market, the first such visit to India after the Indian subsidiary was formed," said the second person mentioned above. The visit is likely to speed up things in India, the person said, adding a new corporate office is also expected to come up in Gurgaon soon.
MG Motor, which is expected to commence production either at the end of 2018 or at the beginning of 2019, has started executing product plans for India, the first person said.
The company is looking to produce 40,000 units of the model in the first year of operation, he said. It will also commence local assembly of semi-knocked down (SKD) kits of another SUV that will be pitted against the Ford Endeavor, this person added.
Sales of SUVs in India have grown at a compound annual average of 16% over the past five years, outpacing sales of cars which rose 1% each year in the same period, according to the Society of Indian Automobile Manufacturers.
In the year that ended in March, while SUV sales jumped by a third to 762,000 units over a year ago period, passenger car sales rose 4% to 2103,000, according to Siam.
Automakers from China, the world’s largest by volume, have evinced interest in the Indian market for some years now but plans of most have not fructified. SAIC is the first company to have moved ahead with its India entry plans.
But the ride may not be easy. Puneet Gupta, associate director at I.H.S Markit, a sales forecasting and market research firm, said that with intensifying competition and the growing dominance of market leader Maruti Suzuki India Ltd, making a mark in the Indian market will be tough for any new entrant. The challenge is bigger for a Chinese company given the negative perception attached to companies and brands from China. “SAIC choosing the UK brand for its India entry is a good move and will take care of the perception issue to a great extent," he said.
Over the last one week, MG Motors officials have twice held meetings with senior Gujarat government officials, said the third person. The company officials expressed concern over ongoing labour issues at General Motors Halol plant in the meetings, he said.
SAIC officials have expressed interest in setting up a greenfield car plant, preferably close to the existing Halol factory. The company also discussed the government’s incentives for mega projects in the state.
In January this year, the Competition Commission of India (CCI) approved the acquisition of certain assets of GM’s Halol plant by SAIC’s Indian subsidiary.
An SAIC official said the company will buy the Halol factory only “if it is free of encumbrances," with no-objection certificates from state authorities.
SAIC has signed a term sheet to evaluate buying the plant but the deal is subject to General Motors securing all government approvals and settling pending labour issues, SAIC’s chief India representative, P. Balendran said in a statement on April 10.
While GM downed the shutters of its Halol factory on April 28 this year, the company is still negotiating with over 500 workers who refused the company’s compensation offer.