Home / Companies / News /  China’s MG Motors to take over Halol plant as GM exits

Ahmedabad: MG Motors India Ltd, the newly formed subsidiary of China’s largest auto maker SAIC Motor Corp. Ltd, is aiming to enter the Indian markets by taking over General Motors India’s manufacturing facility in Halol, Gujarat, from where it looks to launch its iconic MG (Morris Garages) brand vehicles by 2019.

For this, the company is looking to chalk out an India-centric strategy that will allow it to gain a foothold in a market where the US-headquartered General Motors Corp., SAIC Motor’s joint venture partner in China, could not.

“We are going to develop products for Asian markets with our key focus on India. We have seen big multinational brands fail when they try to run their Indian operations from their overseas headquarters. With this in mind, our strategy will be very much India specific and all key decisions will be taken here," according to P. Balendran, executive director at MG Motor India.

On 28 June, SAIC Motor had announced its plan to enter the Indian automobile market through a fully-owned car manufacturing facility in the country and said that the company is in the process of finalizing its manufacturing facility and is firming up its product strategy for the Indian market, details of which will be announced at a later stage.

MG Motors is finalizing its investment plans for Gujarat and an initial memorandum of understanding (MoU) for co-operation is likely to be signed soon with the state government.

“The deal between MG and GM for the Halol factory is in the final stages. The Chinese auto-maker is also weighing the option to make fresh investments to the tune of Rs3,000 crore at Halol. MG Motors wants to make Gujarat its manufacturing hub," according to two government officials in the know of the development. They were speaking on the condition of anonymity.

As part of the ongoing negotiations with the state government, the Halol factory land, which has been leased out to GM India, is likely to be transferred to MG Motors by Gujarat Industrial Development Corp. (GIDC), to which it belongs, for a transfer fee.

Andhra Pradesh is also seen in close competition with Gujarat in wooing MG Motors to set up a green field facility.

“We are in talks with various state governments but our preferred destination is Gujarat," according to Balendran.

In January this year, the Competition Commission of India (CCI) approved the acquisition of certain assets of GM’s Halol plant by SAIC Motor’s Indian subsidiary.

Also Read: Chinese car maker SAIC to commence India operations in 2019

A GM official said that talks with MG India for the Halol factory sale are at an advanced stage and the deal is likely to be closed soon.

“GM India continues to progress toward the sale of the Halol plant assets. GM production at the Halol plant ceased on 28 April, as we implemented our decision to consolidate manufacturing operations at our export hub in Talegaon," a company spokesperson said in an email response.

The introduction of the iconic British Sports Car Brand ‘MG’ in India is an important part of SAIC Motor’s global strategy, the Chinese car-maker said in is 28 June statement.

The MG brand, which originated as an iconic British racing sports brand in the year 1924, has evolved into a modern-day innovative brand through the last 93 years, it added.

Most of the senior officials in MG Motors India, including managing director Rajeev Chhaba, have worked with General Motors in the past. While Balendran used to head corporate communications and corporate affairs at GM India, Chhaba has served as the MD of GM India before Karl Slym.

Tavera recall happened under him, following which he was sacked. The present in-charge for corporate communications at MG Motors India, Saahil Anant, was part of Bala’s team at GM as well.

“Of the 14 top officials hired by MG Motors presently, at least ten have held senior positions at GM India in the past," said a second MG Motors official, who did not wish to be named.

Balendran, who worked at a senior position with GM for over 18 years, is cited to be the man who has played a key role in setting up and running the Halol factory. The company has also hired Anil Yadav as product planning head for MG Motors India. Yadav has played a key role in the development of various products for Maruti Suzuki and Hyundai Motor India Ltd.

When General Motors entered Halol way back in 1996 and rolled out its first Opel Astra car from here, it was the first car company to set up a factory in Gujarat and it targeted the premium segment.

But things have changed in the last one decade after Tata Motors decided to shift its Nano factory from Singur and companies, including Ford India Pvt., Suzuki Motor Corp. (SMC) and Honda Motor Co., have lined up huge investments in the state.

As a key to its operations strategy for India markets, MG Motors is also looking at setting up a dedicated suppliers’ park that will house as many as a dozen vendors of SAIC Motor, China.

Balendran confirmed that the company was working on a plan to set up a vendors’ park close to its manufacturing facility in India that will create local employment.

Another key area for MG Motors is launching electric cars and hybrid cars in India.

“Apart from SUVs and sedans, our product portfolio includes electric vehicles, hybrid, fuel cell among others. All this could be considered for Indian markets where we aim to roll out environment friendly vehicles," said Balendran.

GM India’s bread-winner had been the Chevrolet Tavera, a multi-utility vehicle. The company, however, failed to crack the Indian market with less than 1% market share where its sales fell by more than a fifth last year to just 28,949 vehicles. Unable to turn around its fortunes, GM India last month announced that it would stop selling its vehicles in the country by 2017-end.

“The best pathway for the company to improved financial performance in India is to focus on export production out of Talegaon and withdraw Chevrolet from the domestic market," the company said in its email response.

The company’s plans to introduce SUVs for Indian markets, including the Captiva and Trailblazer, did not get much success.

GM, which is currently very bullish on electric vehicles in the US, made attempts to introduce an electric version of its Spark model in the past called e-Spark.

At the Frankfurt Motor Show in 2009, GM India and the erstwhile Reva Electric Co. declared a technical collaboration to develop affordable electric vehicles for the Indian market. The company shelved its plans after Mahindra and Mahindra (M&M) bought a controlling stake in Reva Electric.

NITI Aayog unveiled a policy blueprint this month aimed at electrifying all vehicles in the country by 2032, which could form the basis for green cars in the country and MG Motors seems to be eyeing this opportunity along with other car companies in India.

Mint reported on 8 June that the company plans to enter India’s highly competitive sports utility vehicle (SUV) market in 2019 with two models.

Also Read: SAIC Motor’s India subsidiary MG Motor to roll out two SUVs in 2019

“We have not decided our product portfolio yet but all I can say is that SUV is the fastest growing segment and we may look into it for the Indian markets," said Balendran.

Amrit Raj contributed to the story.

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