Great Wall acquired General Motors’ Talegaon factory in January for Rs 950 crore as part of a $1-billion investment plan to participate in India’s fast-growing SUV market. The company has approached the Department for Promotion of Industry and Internal Trade (DPIIT) and the Competition Commission of India (CCI) ahead of its plan to launch its vehicles in India next year, said people with knowledge of the matter. The automobile sector is on the automatic approval route, but any FDI from China needs government clearance.
“The proposal has (also) to be vetted by the Ministry of Home Affairs for security clearance,” said a government official. More than 40 proposals involving Chinese investment are said to be awaiting security clearance. Great Wall Motors didn’t respond to queries. Other Chinese automakers including Changan, Chery and Haima, which are close to defining their India blueprint, will be monitoring Great Wall’s progress, said the people cited above.
This will also be test case for such proposals following the rise in tensions between the two nations. Following border clashes in June, India has sought to curb imports and banned apps amid rising anti-Chinese sentiment.
The govt introduced new rules in April making prior government clearance mandatory for any investment from countries that share a land border with India, even in sectors that are on the automatic route. The DPIIT had said this was “for curbing opportunistic takeovers/acquisitions of Indian companies due to the current Covid-19 pandemic”. The move was seen largely targeted at FDI coming from China.
With the border situation still unresolved, security clearances involving Chinese investments will take time, said a person familiar with the matter. General Motors had aimed to stop production in November this year, but with the closure of the deal with Great Wall getting delayed, the US carmaker has extended output by several weeks more.
A General Motors India spokesperson said, “We continue to work towards the end of production and deal close.”
Delays in approval, assuming it will come through, will push back the company’s timetable. “If the clearance comes through in a couple of months, the company may be able to maintain the brand launch timelines of 2021,” said an executive at a vendor, which has been approached to provide parts.
“Already, the rollout has been pushed by a quarter to June of 2021. If it gets further delayed then the launch plan may move to 2022.”
Great Wall was one of the few companies to make a splash at Auto Expo this year in the National Capital Region, with plans of launching four vehicles in India in the medium term. It had also expressed its intention of participating in the mainstream sub-Rs 10 lakh market and challenging the likes of Maruti Suzuki, Hyundai Motor and M&M, apart from electric vehicles.
The already struggling Indian passenger vehicle market, which is expected to slip to a decade low due to the pandemic, had been buoyed by the prospect of more than $5 billion in Chinese investment, especially local component makers that have significant excess capacity.
Group units of Great Wall that produce parts for the company, and are looking at setting up factories in India, may face additional screening, said the people cited above. The plans of Changan, Chery and Haima are said to have been delayed by more than two-three quarters because of flight restrictions. Chinese executives are waiting for the resumption of aviation services to resume India projects. Chinese companies have seen their own domestic markets bouncing back after the coronavirus lockdown was lifted.