The JSW-MG Motor JV Couldn't Have Been More Timely, But Will Its Bets Pay Off?

A goliath is readying itself for a new arena. JSW MG Motor India Pvt Ltd (J-MG), the joint venture between JSW and China’s SAIC Motor marks the steel-to-power giant’s foray into the automotive industry with a focus on new-energy vehicles. 

The venture has ambitious plans. Announcing the launch in March, Sajjan Jindal, chairman of the JSW Group, said that he dreams of creating a new-energy vehicle (NEV) ‘Maruti movement’ with MG. J-MG aims to launch a new car every three to six months starting September 2024 in the premium and mainstream categories and sell 1 million NEVs, including battery electric vehicles (BEVs) and plug-in hybrid vehicles (PHEVs) by 2030. The Indian market is estimated to reach 7-8 million annual car sales by 2030, and J-MG’s target means it’s gunning for 13-14% market share. 

“It's not going to happen overnight… 1 million is not something we have generally seen automotive companies achieving within a span of just seven years,” Puneet Gupta, director and automotive expert at S&P Global Mobility, told The Core. 

It isn’t impossible either. Those involved aren’t just ballsy upstarts, after all. MG Motor entered India in 2019 and is already among the top ten carmakers in the country. JSW is a four-decade-old conglomerate with businesses spanning steel, energy, infrastructure, cement, and sports. SAIC Motor, MG Motor India’s parent, is a Fortune 500 company with a presence in over 100 countries. Both have the capital and ability to quickly scale up. J-MG is spending Rs 5,000 crore on a second manufacturing plant in Halol, Gujarat – something MG Motor India had been exploring since 2022. 

According to the roadmap revealed in March, production capacity will rise from 1 lakh to 3 lakh vehicles every year. It also plans to increase localisation, leaning on JSW’s strong knowledge and experience of the Indian market. 

The venture could be a win-win for both parties. For JSW, which announced its intention to enter the auto sector back in 2018, a partnership with a multinational with a well-known brand and engineering pedigree, is critical. For SAIC and MG Motor, a powerful local partner is comforting at a time when local regulations are increasingly hostile towards Chinese companies. 

The success of this venture, however, hinges on some key factors. Challenges in the partnership and sharing of leadership, cultural differences, geopolitical shifts, and consumer preference could make or break the new entity. 

What’s The Playing Field Like? 

J-MG is entering the market at an opportune, but perhaps uncertain time. For one, the Indian auto market in the last decade has seen some global auto giants like Ford and General Motors exiting the country, leaving behind customers, suppliers and service ecosystems in the lurch. They also left a vacuum in the premium segment which J-MG plans to fill. 

At the same time, India is wooing premium carmakers with lower import duties and the promise of fast clearances. While the top prize, Tesla’s plans are uncertain (CEO Elon Musk postponed a meeting with Prime Minister Modi in April, followed by an unexpected trip to Beijing. Reports say that Tesla is likely to use existing factories to build affordable cars rather than invest in new facilities.), Vietnam’s VinFast broke ground for a unit in Tamil Nadu in February. According to a recent report in the Financial Express, the EV maker is already in talks with dealers as it plans to roll out its first vehicle in 2024. China’s Leapmotor, which was in talks with JSW last year, has reportedly partnered with auto giant Stellantis to enter India. Stellantis is already present in the country through Jeep and Citroen. 

The Indian market is nothing like China’s where the competition is intense. “We are a very unique market,” said Manish Raj Singhania, president of the Federation of Automobile Dealers’ Association (FADA). “Almost 40% market share is owned by one particular owner [Maruti Suzuki]...so it’s not a very competitive market,” he said. Plus, the electric vehicle and NEV space is still very nascent with penetration in passenger vehicles at barely 2%.

There are neither enough products nor enough players. “We see the space gaining real traction post-2025,” Singhania said. 

With little competition, the venture could certainly shake things up and grab space for itself. What it would have to grapple with is earning the trust of the value-conscious Indian consumer. 

What Works For The JV? 

JSW and MG Motor have unique, complementary strengths. MG, the iconic British brand acquired by SAIC which entered the Indian market in 2019, has done well for itself in what it calls the MG 1.0 era. 

“It was able to enter a relatively crowded market, establish a good product market fit with its portfolio and was able to work cohesively with all stakeholders,” Harshvardhan Sharma, head of the automotive retail practice at Nomura Research Institute told The Core. 

SAIC Motor is China’s largest automotive OEM by revenue and a global leader in EV technology. The company has significant expertise in automotive R&D, manufacturing, and marketing globally, giving the JV an edge. 

JSW has local market expertise, a deep understanding of the regulatory landscape, and well-entrenched distribution networks. J-MG has already begun product localisation, a key goal of the venture. It is in talks with key suppliers to localise the e-drive for the company. 

Suppliers are more likely to trust JSW rather than SAIC, said Gupta. 

One of the biggest advantages for JSW is that the EV industry is new and it does not carry any baggage. “For example, Maruti is making 2 million ICE vehicles today, so there is a lot of investment at stake,” Gupta said. It’s tough for established automakers to shift gears but JSW could hit top speed quickly. At the moment, Tata Motors commands 70% of the Indian EV market. Starting with the launch of an EV variant of its successful crossover SUV Nexon, the company has managed to scale up, leveraging its decades of experience in the auto sector as well as other businesses like Tata Power, Tata Auto Components, Tata Chemicals, etc. 

The Tata Group announced in 2020 that six companies from the group are coming together to create an ecosystem for EVs. While Tata Power addresses India’s charging needs as the market leader, Tata AutoComp had lined up at least half of an investment of around Rs 2,500 crore for localising EV components and Tata Chemicals is on the radar after the conglomerate invested Rs 13,000 crore to set up a lithium-ion cell factory in Gujarat’s Sanand. 

JSW too plans to leverage its other businesses to create an ecosystem for EVs, including battery manufacturing and charging infrastructure. The JSW Group recently signed an agreement with the Odisha government to set up an integrated EV and battery manufacturing project at Cuttack and Paradip with an estimated investment of Rs 40,000 crore. This is not part of the JV with SAIC.  

The current EV and hybrid cars in the market are versions of already existing ICE vehicles. For instance, Tata Motors’ Nexon EV,  or Mahindra & Mahindra’s XUV hybrid variants with regenerative braking. But the market will benefit from more “born-electric” vehicles, Singhania pointed out. These are models that are designed solely as electric cars and not as variants of petrol/diesel cars and could optimise technology and fine-tune some of the technical problems users currently face with born-again EVs. MG’s Comet is a born EV and the JV is likely to come up with solely electric launches. The company, however, has not revealed detailed plans yet. 

The Core reached out to JSW Group and MG Motor India for comment and will update this story upon receiving a response. 

While MG Motor India’s application for production-linked incentive was kept ‘pending’ by the government, the partnership and increased localisation are now expected to unlock the scheme for J-MG. 

The Challenges

One of the key challenges that the companies face, as with any new partnership, is navigating governance issues. “There can be conflict in terms of profitability, in terms of mindsets, what to launch or not to launch [or] in terms of localisation,” said Gupta.

Currently, JSW owns a 35% stake in the venture, followed by Indian Financial Institutions (IFI) with 8%, MG Dealers taking 3% and employees 5%. The remaining 49% is with SAIC. The chairman of the new entity will be from the JSW Group, the board will be jointly managed by JSW and SAIC, and the steering committee will have representatives from JSW, SAIC and IFI. 

How the company is governed will be key to the venture’s success. Given that SAIC is  Chinese and JSW Indian, negotiating different work cultures and expectations will require deft handling. SAIC’s Chinese citizenship could become problematic should India-China relations worsen. 

While JSW’s local market knowledge, capex and wide portfolio would greatly speed up production and supply chain management, there is no guarantee that consumers will buy its cars. EV vehicle sales are still sluggish as unlike fuel pumps, electric charging stations are not ubiquitous. Besides, filling up a petrol tank takes mere minutes while charging up an EV battery takes hours.  

“Building brand loyalty quickly will be necessary,” Sharma said. Strategic marketing, perhaps of JSW as a ‘national’ brand, and good after-sales service network could encourage adoption. As The Core previously reported, Indian OEMs, including MG Motor India, have been struggling with after-sales services when it comes to EVs. 

J-MG’s ability to introduce a new car every 3-6 months will largely depend on sustained consumer demand. It is likely that the venture will use JSW’s “national” brand image as well as MG’s international clout (MG is a reputable British brand bought by SAIC in 2007) to position itself in the market. Indian consumers have very specific requirements such as feature-rich or high-mileage vehicles, Singhania pointed out. Catering to these very specific needs with a wide range of offerings would also help a newcomer build its consumer base.