Chinese automakers face stumbling blocks in Indian market

Chinese smartphone makers are all the rage in India, but when it comes to the automobile market, not a single Chinese company has yet made its presence felt.  That’s not because they didn’t try.

That is because Chinese Foreign Direct Investment (FDI) projects in the auto sector worth $5 billion are yet to be approved by the central government following India’s military standoff with China since 2020, according to TechSci Research, a market research and consulting company.

In the last four of five years, many Chinese automakers such as Great Wall Motors (GWM), Changan Automotive, MG Motor, Haima Automotive Group and Chery Automobile have been exploring the Indian passenger vehicle market.

Some even announced investments as well to make cars and trucks in India. With their FDI proposals not going through, they are rethinking their strategy and are now looking at other countries in Asia like Thailand, Indonesia and Vietnam, analysts said.

Moving to Brazil, Indonesia instead 

For instance, GWM, China’s largest SUV maker, which had initial plans to establish a strategic foothold in India, has now redeployed its resources and decided to invest USD 2 billion in Brazil.

Chery Automobile, which too was interested in India, re-entered the Indonesian market as part of its wider push into the Association of Southeast Asian Nations (ASEAN) market.

Likewise, Changan Automobile, which had initial plans to explore the Indian market, settled for Pakistan a few years ago.

The $5 billion in stuck FDI proposals include those from GWM for $1 billion (Rs. 7,800 crore) and from Changan Automobile for $500 million.  Haima Automotive's dream of entering the Indian automobile market is also on hold.

Quiet exit  

As reported first by Moneycontrol.com, GWM has now made a quiet exit as its planned purchase of General Motors’ automobile plant hasn’t gone through. GWM, which unveiled a suite of its vehicles at Auto Expo 2020, took the decision after the term sheet to acquire GM’s Talegaon factory expired at the end of June, after two extensions.

When contacted by Moneycontrol.com, GWM’s global spokesperson confirmed the development.

“The term sheet for the sale of Talegaon site between GWM and GM expired on June 30, 2022, but we have been unable to obtain approvals within the timeframe,” the spokesperson said. Adding,  “Hence, both parties decided to terminate the transaction. GWM will continue to pay attention to and study Indian market, look for opportunities with the hope to provide new experience for Indian consumers with innovative products in the future.”

MG Motor, Haima Automotive 

Similarly, MG Motor India announced it was planning to invest around Rs. 4,000 crore on a second facility, for which it was in talks with several state governments .

The British car brand, which is owned by China-based SAIC and which took over General Motors India’s first manufacturing facility in Halol, was also in the news for expressing interest in acquiring Ford’s Sanand (now with Tata Motors) and Chennai plants.

However, the deal couldn’t do through as MG Motor was facing numerous obstacles in getting FDI approvals. It eventually came up with the alternative plan of raising Rs. 5,000 crore through the External Commercial Borrowings (ECB) or the private equity route in order to fund its expansion drive.  MG Motor India spokesperson, when contacted by Moneycontrol.com, said: “We would not to like to comment on the queries as of now. We will surely reach out to you later.”

Haima Automotive, which is a part of Chinese state-owned First Automobile Works (FAW), also had plans to enter the Indian passenger vehicle market. The company entered into a technical collaboration with Bird Electric Mobility for an electric car project named ‘EV1’. The project remains in cold storage due to the pandemic and ongoing geopolitical tensions.

A Haima spokesperson didn’t reply to a request for comment as of the time this report had been published, Bird Electric Mobility was unwilling to comment despite repeated requests.

Chinese state-owned automobile manufacturer Changan Automobile too closed its India office early last year after its investment proposals were not considered by the government. There was also a lot of speculation that Chery Automobile was keen to enter a joint venture agreement with Tata Motors for passenger vehicles. But the talks couldn’t work out either.

Emailed queries sent to the spokespeople of the both the above Chinese companies remained unanswered. We will update this story as and when they reply.

“Chinese auto companies saw immense potential in India amongst all its neighbouring countries a few years back. However, we are seeing reduced activity now and Chinese companies are exploring ASEAN markets as an alternative,” said Puneet Gupta, director, S&P Global Mobility, Automotive Sales Forecast India & ASEAN.

“Chinese automakers would have given a perfect combination of technology, safety and value to the Indian consumers. They would have definitely put Indian on world map of EV countries much faster then what will happen now,” noted Gupta.