Mahindra & Mahindra, an Indian automaker, and China’s Shaanxi Automobile Group have reportedly agreed to form a $3 billion joint venture to establish a car manufacturing plant in India. The proposed manufacturing venture, majority-owned by Mahindra, is set to be located in the state of Gujarat, the home state of Prime Minister Narendra Modi. However, Mahindra has denied the report, stating that there is no truth to the matter. Despite this, shares of Mahindra rose by 2.5% on the Bombay Stock Exchange following the news.
The joint venture aims to create an export-oriented, integrated manufacturing hub for assembled cars, engines, and car batteries. Mahindra has already sought government approval for the Chinese investment. On the other hand, attempts to contact Shaanxi’s phone numbers listed on their website have been unsuccessful. The ministries of commerce, heavy industries, and foreign affairs in India have not yet issued any comments on the matter.
Chinese investment in India has faced additional scrutiny since 2020 due to tightened restrictions after deadly border clashes between the two countries. India has been cautious in approving Chinese investments, causing delays or cancellations of several billion-dollar projects. Notably, a $1 billion proposal by BYD last year has been held by the Indian government due to security concerns.
Interestingly, the proposal for the Mahindra-Shaanxi joint venture comes at a time when India is considering easing restrictions on Chinese investment in non-sensitive sectors such as solar panels and battery manufacturing. The move is a result of India’s desire to leverage Chinese expertise in these areas, where New Delhi lacks sufficient knowledge and capabilities. The Indian government has recognized the need to review its stance against Chinese investment as foreign investments in the country have dropped to a 17-year low. India’s Finance Minister, Nirmala Sitharaman, has expressed support for promoting foreign direct investment from China to boost India’s exports.
In conclusion, while Mahindra has denied the reports of the joint venture with Shaanxi Automobile Group, the potential collaboration highlights the evolving dynamics of Chinese investments in India. As India seeks to revive its economy and attract foreign investments, it is reevaluating its stance on Chinese investment and considering areas where collaboration can be mutually beneficial. The establishment of a joint venture in the automobile sector could contribute to technological advancements, job creation, and increased exports for India, provided the necessary approvals are obtained.
