July 7, 2017 10:11 pm JST

SAIC Motor takes over General Motors' closed India plant

Chinese company to invest $300 million in new Gujarat factory

ROSEMARY MARANDI, Nikkei staff writer

© Reuters

MUMBAI -- China's largest carmaker, SAIC Motor, has chosen General Motors India's abandoned manufacturing plant in the western state of Gujarat to produce its MG sport cars from 2019.

The company has signed a memorandum of understanding with the state government of Gujarat to take over the plant in Halol and plans to invest 20 billion rupees ($310 million) in it over five years. Five Chinese auto ancillary companies -- Waling Industry, Ling Yun, Sevic, Yan Feng and Huichoung -- also plan to set up bases near the plant. The entire project is expected to create over 1,000 jobs in the region.

Spread over 172 acres of land, the project site was leased to GM India in 1996. The plant has a production capacity of 127,000 units a year.

According to a report by local media outlet Business Standard, SAIC Motor India subsidiary MG Motor is seeking speedy approval from the government for the site. The state of Gujarat will also consider incentives to be given to the company once it submits a detailed project report.

"Sources in the know indicated that in the new [goods and services tax] regime rolled out on July 1, it is difficult for the state governments to offer tax incentives. However, the state government might waive duty charges on stamp and electricity," Business Standard said.

The announcement comes less than two months after GM called time on its bumpy two decades in India. While it has kept its plant in Maharashtra for export purposes only, the Gujarat plant was put up for sale.

SAIC Motor plans to bring in environmentally-friendly mobility solutions under the iconic MG (Morris Garages) brand.

 Founded in the U.K. in 1924, MG became globally known for its sports cars and cabriolet series. SAIC acquired the MG brand and its businesses in 2008.

SAIC and GM India have their own history. The Chinese company bought a 50% stake in GM India in 2009, when the American company was going through a financial crisis. GM India later bought the stake back.

Shanghai-headquartered SAIC Motor's core businesses include the design, production and sale of vehicles, the manufacture and supply of key components, provision of after sales services, and dealing in trade, auto finance and exports. The company owns the MG, Roewe and Maxus brands. SAIC Motor has partnerships with Volkswagen and General Motors.

Experts believe that even though GM has pulled out of the country, there is still strong market potential as car ownership levels are quite low and disposable income is increasing.

Research firm IHS sees the country becoming the world's third-biggest auto market in 2020, trailing only the U.S. and China. Production is predicted to jump from the current sixth place to fourth, behind China, the U.S. and Japan.

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