Mahindra & Shaanxi Automobile Reportedly Plan $3 Billion Joint Venture

Indian automaker Mahindra & Mahindra and China’s Shaanxi Automobile Group are reportedly discussing establishing a $3 billion joint venture to build a car manufacturing plant in India.

According to sources familiar with the matter, Mahindra is expected to hold a majority stake in the proposed venture, which will be located in Gujarat, Prime Minister Narendra Modi’s home state. The companies are currently awaiting approval from the Indian government to invest.

Mahindra Denies Reports:

Following the publication of the Reuters report, Mahindra stated the stock exchange, categorically denying the claims. “The article is unfounded, and there is no truth in the matter,” Mahindra said. Despite the denial, shares of Mahindra rose by as much as 3.1%, eventually closing 2.5% higher at ₹2,749.15 on the Bombay Stock Exchange on Friday.

The proposed venture aims to create an export-oriented, integrated manufacturing hub for assembled cars, engines, and batteries. The sources indicated that Mahindra has already sought government approval for the Chinese investment. However, neither Shaanxi Automobile nor Indian government ministries responded to requests for comment.

Indian Government’s Stance on Chinese Investment:

Since 2020, the Indian government has required approval for any Chinese investment in the country following heightened tensions between the two nations after deadly border clashes. This has led to delays or cancellations of several billion-dollar investment proposals from Chinese companies such as BYD Co Ltd, Great Wall Motor, and SAIC’s MG Motor.

For instance, a $1 billion proposal by BYD last year was held up over security concerns. However, the current investment proposal comes when India considers easing restrictions on Chinese investments in non-sensitive sectors, such as solar panels and battery manufacturing, where local expertise is limited.

Potential Shift in Policy:

India’s top government officials have recently hinted at a potential review of the country’s stance on Chinese investment. This comes as foreign investments in India have dropped to 17-year lows.

Finance Minister Nirmala Sitharaman expressed support for the views of Chief Economic Adviser V Anantha Nageswaran, who suggested that New Delhi could promote foreign direct investment from China to boost India’s exports.