‘Steeling’ its way into auto: How the JSW, MG Motor India JV will play out | Autocar Professional

The event in mid-March announcing the formal launch of JSW MG Motor India — a joint venture between the JSW Group and the Shanghai Automotive Industry Corporation’s (SAIC) Motor’s British brand MG Motor India — was one of utmost confidence, giving the country’s auto industry much to look forward to.

“We will launch one newly-designed car every 3 to 4 months, starting September 2024. Our aim is to sell one million NEVs (EVs and PHEVs) by the end of the decade,” said Sajjan Jindal, Managing Director and Chairman of the JSW Group. “My dream is to create a ‘Maruti moment’ for new energy vehicles. SAIC Motor’s technology and the JSW Group’s manufacturing prowess will make it an unmatchable team.”

While their ambitious goals are commendable, Maruti didn’t become what it is overnight. And re-creating this inspired “Maruti moment” will require more than just a dream for JSW.

The steel titan’s corporate success mirrors the prowess he displays on the squash court, where agility and collaboration are paramount. There’s a metaphor in the strategic route he’s adopted as he enters the realm of automotive manufacturing, bringing to fruition his long-time dream. The 64-year-old aims to do to the newly formed JSW MG Motor India what he did more than a decade ago to JSW Steel, when they overthrew market leader Steel Authority of India to become the country’s largest steelmaker — a feat that took nearly 33 years.

The chairman of the USD 23 billion JSW Group that’s into businesses like steel, cement and sports, among others, is now eyeing a 33% market share of India’s new energy vehicle (NEV) segment by 2030. He hopes the USD 110 billion Chinese automotive giant’s British label MG Motor India will help them achieve this ambitious goal.

THE FORMIDABLE VISION

JSW MG Motor India, which plans to continue selling vehicles under the MG brand name, will see an investment of Rs 5,000 crore. This funding will be used to produce 3 lakh units a year, improve localisation and develop new product technologies to make “cars that India has not seen.” With carbon neutrality, sustainability and green mobility at the core of their vision, the joint venture will stay focused on accelerating faster adoption of EVs.

Jindal also wants to introduce cleaner alternatives in India, like plug-in hybrids fitted with batteries with a range of 150km; to expand the NEV market and combat the challenge of inadequate EV charging infrastructure in the country. To this end and to create a value chain at the back end, the JSW Group is expected to shell out USD 10 billion in the next 10 years. This mammoth allocation will include mining their own lithium, making their own batteries, getting into the cathode and anode business, and even turn supplier for other automakers eventually. The group also aims to venture into the commercial vehicles space and is open to multiple partnerships.

Parth Jindal, Sajjan Jindal’s son and a member of the steering committee at JSW MG Motor India, acknowledged that MG Motor has had a good five years in India since its debut and with this JV, they would “become even more impactful and successful.”

“We will deepen localisation and manufacture them here in India. With technology from MG and the group’s strength, we will also build a charging network,” he said, adding that by leveraging MG’s cutting edge tech and JSW’s local manufacturing knowledge and acumen, their new entity would make leading products in India, for India and the world. Clearly, JSW is beaming with multiple project ideas to be part of a highly competitive Indian auto market. Yes, they have the money and resources to back these projects, but they need to ensure that their first few steps don’t waver for a smooth take off, experts have cautioned.

According to Subhabrata Sengupta, Executive Director, Avalon Consulting, this deal makes a lot of sense from a synergy standpoint. “JSW has been eyeing the automotive field for quite some time now. For at least three to four years. They figured that it’s not that easy to build a car. And just at that time, a proven car brand was looking for a partner,” he said. Jindal Jr expects India to grow from a 4 million passenger vehicle market to a 10 million passenger vehicle market over the next 10 years. This is an extremely bullish expectation, as even the largest car maker, Maruti Suzuki, which has dominated our roads for over three decades, has forecast total industry volumes to be around just six million.  

Parth expects this growth to come on the back of EVs. “We are very convinced that with all the support being provided by the government, EVs are going to follow the same adoption path here like in China. India is an oil importing country, and the high current account deficit is due to oil imports. For India to become truly Atmanirbhar (self-reliant), EVs are the way to go,” he asserted.

BETTING ON GREEN

JSW MG Motor India has pinned its hopes on the future of greener vehicles and also aims to add plug-in hybrid offerings to its India portfolio. Currently, the company offers the ZS EV and Comet EV in its lineup of electric cars, in addition to the Astor compact SUV, Hector and Hector Plus in the midsize SUV segment.
According to Rajeev Chaba, CEO Emeritus, JSW MG Motor India, they have long talked about ‘Indianising’ the company, since the Chinese-owned firm began facing expansion-related restrictions in FDI approvals from the government amid geo-political tensions between the countries. And this is the moment of reckoning.
“MG India 1.0 has had a very good five years, and it’s now up to the joint venture to make MG 2.0 even more impactful and successful,” he emphasised.

THE MG-JSW EQUATION

Under this partnership, the JSW Group will hold a 35% stake in the entity, Indian financial institutions 8% and dealers 3%; 5% is being kept for employees. So 51% of the company will be owned by Indians. “The deal was structured in a way that it’s a win-win for all stakeholders,” Chaba highlighted.

VG Ramakrishnan, Managing Partner at Avanteum Advisors LLP, pointed out that had MG Motor not found an Indian partner, they would have remained a very small player in the market. They now have a chance to make it big. “They’d have been catering to a very small niche and would have probably withered away from Indian roads. Their product portfolio, too, was getting a little jaded. This was a great marriage of convenience. JSW will bring in investment, while SAIC Motor will bring the technology and the product portfolio,” he explained. Experts caution that ultimately it’s the partner that controls the technology, in turn controls the JV. Which means JSW MG Motor India will still be dependent on SAIC Motor for products and technology in the automotive space, and in the long run, it’s unclear how that will pan out for the new joint venture company.

LOCALISATION IS THE KEY

As per Sajjan Jindal’s internal diktats, all expansion projects have a target of three years to start generating returns. In the automotive sector, to do so, pricing and localisation would play a key role. For EVs, the group aims to lower the production costs by enhancing local sourcing through a strong supply chain by leveraging its subsidiaries.

Recently, the group also received the go-ahead from the Odisha government to set up an EV components manufacturing complex in the state, consisting of a copper and lithium smelter, with an investment of Rs 40,000 crore. The conglomerate seeks to bring down the cost of production for its new EV venture by sourcing components from this Odisha plant.

“Products from the investment we make in Odisha will mostly cater to this joint venture. Like the batteries we make would be for JSW MG Motor India,” Parth said. “We hope to bring down the cost of the product, localising in depth, so we can really bring you NEVs at the right price point, if not low, at least at the same price as ICEs. The JSW group has set a target of localising cell battery manufacturing in the next 18 to 24 months.

BRANDING AND PRICING

Cars under the new JSW MG brand will not be priced in the premium bracket since, as Parth said, it wouldn’t be conducive to selling a million cars. The upcoming models will be manufactured in India, and the company will focus on increasing localisation from the current 80% to 90% to ensure competitive pricing.
With these aggressive targets, the group may face a unique challenge — the cost of sourcing from India may be higher than importing parts from China, which are still cheaper due to massive economies of scale. Plus, securing a reliable source and attractive prices locally is a time-consuming affair, experts explain.  
Furthermore, JSW and MG are also looking to increase production in Halol, Gujarat, primarily for NEVs.

“We will offer a range of vehicles from ICEs to NEVs, staying focused on building a robust and sustainable EV ecosystem in India,” Chaba said. “We are firmly committed to expanding our manufacturing footprint with extensive localisation by leveraging JSW Group’s extensive knowledge and expertise in manufacturing
at scale.” JSW MG Motor will be looking at local assembly of batteries at their factory in Halol and also an additional piece of land on the outskirts of Vadodara, to almost double its capacity to over 3 lakh units per annum.

Leveraging the JSW Group’s capabilities is also expected to give them a massive advantage. “As we move forward, the entire quantity of steel for the JV will be sourced from JSW Steel,” Parth said.

JSW Group’s biggest competitor at present appears to be the Tata Group. Its one-Tata approach of relying on its vertically-integrated group companies — Tata AutoComp, Tata Technologies, Tata Consultancy Services, Tata Steel, Tata Agratas, Tata Power, etc. — has worked exceptionally well, so far, and the Jindals may follow a similar approach. Here, the JSW Group’s renewables, steel and new energy businesses will come in handy. How MG Motor leverages these capabilities going forward remains to be seen.

THE FUTURE IS IN EVs

With their NEV and EV offerings, MG Motor is priming itself to take on EV industry leader Tata Motors, which has a market share of over 75%. The automaker is set to offer two new EVs based on the E260 EV platform that will churn out a five-door SUV and compact MPV, which are likely to be positioned below Rs 15 lakh. These will compete with Tata Tigor X-Pres T EV and BYD’s E6 MPV respectively.
In a market of about 81,000 units per annum, only about 10% to 15% caters to the fleet segment, which is a huge white space for MG Motor to introduce newer designs and tech-enabled products. Having started with the ZS EV, followed by the entry-level Comet, MG wants the new MPV and SUV to bridge critical gaps in its portfolio and expand the addressable customer base of around Rs 15 lakh, seemingly the sweet spot for upgraders in the market.

The JSW Group, too, aspires to launch its first plug-in hybrid electric vehicle (PHEV) by 2025, with a big focus on mass market products. “We’re banking on a PHEV. It’ll be the perfect transition product for our company as it would take care of consumer anxiety. We’ll be the only company to have this tech that will be eventually localised,” Parth Jindal said.

Once again, the target here appears quite ambitious, given that a PHEV is as good as offering two engines in one car. This would lead to an additional cost of 25% minimum and would clearly be challenging to attain prices close to pure ICE vehicles. The only way to achieve this could be cheap imports from China versus taking a knock on the bottomline and selling at a loss, both of which may prove detrimental in the long run. Parth believes that the price point will serve as a significant disruptor in the market going forward.

“We will have products in the mainstream and premium market. As the economy grows people will upgrade. MG has a slew of products globally in the premium portfolio, and we plan to bring those into India,” he said, adding that the group has also applied for the government’s Production Linked Incentive (PLI) Scheme in battery manufacturing, and their next big focus will be to manufacture cells locally.

THE WAY FORWARD

The Indian auto market is replete with examples of big conglomerates and MNCs entering the market — read Nissan, Volkswagen, Ford and General Motors — with tall claims and announcements and eventually facing a rude reality check, with some exits. Now, as the Jindals prepare for their grand entry in the auto ecosystem, and MG Motor India gets a new lease of life, there’s one question on everyone’s mind: Sajjan Jindal’s childhood dream of manufacturing cars may have come true, but can he do it successfully and profitably?

Success has followed Jindals beyond steel into every sector he’s touched, but those were primarily infrastructure-related. He now has the most challenging task on his hands of breaking into the mindshare of value-hungry Indian car buyers — an endeavour that global automakers like Volkswagen, Toyota, Honda and Renault-Nissan are still figuring out. 

This interview was first published in Autocar Professional’s April 1, 2024 issue.

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