Mahindra is a company that has been long infamous for the lack of production capacity of its models. This might get solved soon as Mahindra and Shaanxi Automobile Group plan on setting up a $3 billion joint venture that will be responsible for building a car manufacturing plant in India. If reports of Reauters are to be believed, this plan will be put into action as soon as they get approval from the Indian Government.
What The Venture Will be Like
Mahindra plans to own a majority share of the joint venture according to sources. Some other sources saidIts proposed plant might be set up in Gujarat. It will produce cars not only for the Indian market, but also to export in other countries. Along with cars, this production facility will manufacture engines and car batteries.
The China Angle
One dicey part of this deal might be the origin of Shaanxi Automobile Group i.e. China. All companies that take Chinese investments are required to take government approval from 2020/ This happened after the government had put measures to restrict Chinese investment after the two countries clashed on their borders. Mahindra would have to follow the same and get a government approval before they build their joint venture up.
India’s Strong Stance on Chinese Investment
Investments amounting to billions of dollars have faced delays or cancellations in India over the years due to extra scrutiny of companies like BYD Co Ltd, Great Wall Motor, and SAIC's MG Motor. Last year, a $1 billion proposal by BYD was stalled by the government due to security concerns.
Ray Of Hope
However the timing of the move might prove crucial as the Government has sought to soften the restrictions on investment from China in non sensitive sectors where India lacks expertise. These include battery production and solar panels.
The Indian government officials have been reconsidering India’s stance on Chinese investment as the country is facing a 17-year low in foreign investment. Chief Economic Adviser V Anantha Nageswaran recently suggested that New Delhi might encourage foreign direct investment from China to enhance India's exports. Last month, Finance Minister Nirmala Sitharaman voiced her support for this perspective.
Mahindra Denies Claims
In a latest release, Mahindra & Mahindra denied the news given by the report and called it unfounded. The company stated in a regulatory filing “As there has been some unnecessary speculation raised by the Reuters’ article, the company on its own considers it necessary to clarify to the stock exchanges that the article is unfounded and there is no truth in the matter,”
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