MG HectorWith India and China attempting to bury the hatchet at the SCO summit in Tianjin, it will be interesting to see whether the political thaw will also lead to relaxations on the business front.
More specifically, in the case of the automotive sector, will India be more inclined to letting Chinese brands set up shop here and unleash their electric vehicle strengths? For now, this seems unlikely since the wounds are still deep on both sides and it would be unrealistic to expect two wary opponents to get into a spirit of tremendous bonhomie overnight.
Yet, it would be perhaps relevant at this point to turn the clock back a little and get back to the time when SAIC Motor of China first decided to enter the Indian market. This was during the time of the Lehman crisis of 2008 and the slowdown that followed which left most parts of the world in a state of near paralysis.
The US took a battering and Detroit, the automobile epicentre, had its back to the wall with big brands like General Motors, Chrysler and Ford struggling to stay afloat. Back in India, the GM top brass realised that they were up against a huge challenge and this is when they turned to their trusted Chinese ally, SAIC, for help.
SAIC, GM team up
What followed was quite remarkable in terms of pragmatism and speed of execution. The two companies quickly created a 50:50 joint venture for India as part of the revival strategy which would see jointly developed products on a common platform. In the meantime, products from the SAIC-GM-Wuling stable in China comprising a mix of passenger cars and pickups were identified for the new global foray.Customers in India did not exactly get into raptures seeing cars like the Chevrolet Enjoy, which was a derivative of a Wuling product, but SAIC was not deterred and began carefully studying the market and studying market behavioural patterns. Eventually, GM got into the driver’s seat all over again by buying out SAIC’s stake in the India alliance.
The Chinese auto brand had, meanwhile, done its homework for India and the next opportunity for a market entry happened when GM decided to exit the country with the closure of its Halol plant in Gujarat while the other facility in Talegaon near Maharashtra would follow suit in due course of time.
SAIC decided to step in as the new owner in 2017 and then decided to go flat out in rebooting the Halol facility with an all-new business plan. The most important component was to drop the Chinese association, which was clearly an issue with Indian buyers and use the British brand, MG Motor, as its face in the country.
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MG as the new India face
As the underlying message from the leadership team went: “MG brand is designed by the British at the UK Design Centre, engineered by the Chinese in their global design/engineering centres and produced in India by Indians.” It was decided that the first product would be an SUV and it was here that the seeds were sown for the birth of the Hector which recently celebrated its sixth anniversary in India. At the time of its planning, there was only only a petrol engine available from SAIC which would not have made sense for India at that point in time.
Had Hector been launched without a diesel option, dealers in India would have literally revolted since a sole petrol offering would have fallen fallen flat on its face. Realising this, the company reached out to Fiat Chrysler Automobiles — now part of the Stellantis umbrella following the merger with Groupe PSA of France — for the diesel engine.
Hector was loaded with features and it was spelt out loud and clear that product quality had to be tops while failure was just not an option. Spare parts were also priced competitively and dealers were assured profitability. Once it was launched, Hector had clearly set the benchmark and raised the bar in a space where Hyundai and Kia were the participants.
Message to dealers
The message to dealers was loud and clear: “We will take care of your profitability while customer service is your responsibility.” The eventual objective was to have a sales and service team that would be among the best in the country. “Our endeavour is to surprise the customer in a positive way,” an MG Motor India executive had then remarked.
The other products that followed may not have had the same aura of Hector but ZS EV did its job and, from the leadership’s point of view, a reasonably good success story. The same could not be said for Gloster and Astor while the Comet EV has been clocking around 1,000 units a month.
The next big thing in the electric space was Windsor whose launch also heralded a change in ownership at MG Motor India with the JSW group getting into the picture and acquiring 35 per cent from SAIC. At the time of its planning, the top priority was to ensure a competitive price tag if it had to be a success. Ideally, Windsor had to be like Hyundai Creta from outside, given that it is among the best proportioned SUVs, while the inside needed to be like Hector.
The pricing strategy at under ₹10 lakh without the battery and ushering in battery-as-a-service for a monthly fee caught the imagination of the masses like never before. Customers made a beeline for Windsor as its low operating costs vis-a-vis a petrol options tilted the scales in its favour. The heady market response and also augured well for the new partnership between JSW and SAIC .
The Jindals are now determined to take the JSW MG Motor story to the next level where electric will be the biggest growth lever in the coming years. They have already gone on record to say that they have big plans going forward which means that their alliance with SAIC can only grow from strength to strength.
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Right ecosystem
A senior member of the SAIC management team had told the writer in an earlier interview, “We want to be one of the first movers in EVs and will seek the right ecosystem to be successful. We also want to be a leading player in this space but time will tell if we manage to pull it off. We are hopeful and optimistic and the key is to see if customers find our value proposition compelling.”
SAIC representatives had, likewise, told visiting journalists in Shanghai some years ago that the company would go beyond products to include other components of the automotive supply chain ecosystem such as electrification, ride-sharing, logistics and finance. The Chinese automaker has since diluted a part of its stake in the alliance with the JSW group and will perhaps shed more equity in the future. However, it will still keep an eye on the Indian landscape and could even look at entering other new vehicle segments.
It was SAIC’s rapid success story that prompted other Chinese companies like Great Wall Motors to plan an entry into the Indian market. In 2020, it had announced that it would acquire the other GM plant in Maharashtra and launch a slew of SUVs. Great Wall Motors had even exhibited a huge product lineup at the 2020 Auto Expo in New Delhi but then the pandemic struck followed by the Chinese army’s aggression along the border.
India was quick in reacting and put on hold new investments from China which meant Great Wall Motors had to abandon its plans. The same went for Changan Automobiles which was eyeing the Indian landscape but exited when it became amply clear that this was not going to happen in a hurry.
Byd and Leapmotor
Right now, it is only BYD which is the other prominent Chinese brand operational in India but has not got the green signal to make fresh investments. SAIC managed to get out of this tangle with the JSW alliance and it now remains to be seen if BYD can think of a similar acceptable formula where a local partner can be roped in.
The next brand from China that is due to make an India entry is Leapmotor which is now in the Stellantis portfolio. The products that will be launched here could steer clear of the Chinese association and sport the Citroen badge instead. A similar case can be found in Volvo Cars, which is present in India, and yet owned by Geely of China.
Meanwhile, China has been surging ahead in the EV race globally with brands like BYD posing a real threat to established players like Tesla. With India and China now coming closer all over again, even while reiterating that they will maintain strategic autonomy, there is perhaps more than a good chance of giving the go-ahead to Chinese investments in the Indian auto arena.
Even if this were to happen, it will be accompanied by stiff conditions like localisation, having an Indian partner on board and so on. Since the time of the SAIC entry, other Chinese brands have been keen on entering India but are now more focused on other markets in Latin America, Europe and ASEAN. Will the tide turn in their favour to access India? Only politics can decide by the end of the day.
