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Mahindra executives have made several visits to the Telgaon facility in the past few weeks, people familiar with the matter said. The visits came after GM’s term sheet with Chinese automaker Great Wall Motors, which was in talks to acquire the plant, expired on June 30.
A person close to the matter said that apart from Mahindra, British brand MG Motor has also shown interest in the GM factory.
However, GM may make it less of a priority as MG Motor’s investment may face more scrutiny and take longer in India due to its Chinese ownership, leaving Great Wall out of talks. There is a reason. Mahindra declined to comment, while MG Motor did not respond to an email seeking comment.
Mahindra is considering a strategic buy.
A GM India spokesperson did not offer specific comments about Mahindra or MG but said, “GM continues to explore options for the sale of the site.”
If talks between Mahindra and GM lead to a deal, it will be the second case of a local company helping an American carmaker exit its investment in India.
Both GM and Ford have left the Indian automobile market. While Ford found a buyer for its plant within a year of announcing its exit from India in September last year, GM is still looking for a buyer for the facility five years after exiting the market.
Earlier this month, Tata Motors announced the acquisition of the Ford plant for just under $100 million. GM could sell the facility for $60-75 million, or less than Rs 600 crore, the people said.
Getting the factory up and running – GM is using it to build cars for export by December 2020 – will help Mahindra accelerate its expansion plans. The manufacturer of the XUV 700 and Scorpio N SUVs is sitting on bookings of around 240,000 vehicles with a waiting period of 12-18 months for some models.
An investment of Rs 4,000-5,000 crore is required to build a new facility to manufacture a quarter of a million passenger vehicles and an additional Rs 7,000-8,000 crore for the sub-ecosystem. According to experts, if Mahindra could buy GM India’s plant for even less than Rs 1,000 crore, it would be cost-effective.
A GM spokesman said the facility “remains a well-maintained, state-of-the-art industrial site, with strong links in the supply chain and transport networks.”
Mahindra has announced capacity expansion at its existing factory in Chikan. GM’s Telegaon plant is just 20 km from Chikan.
Electric push
It may also look to acquire the plant under its newly formed electric vehicle (EV) subsidiary, which received an investment of around $250 million from a British investment company at a valuation of $9.1 billion.
Given the strong appetite in the EV business and the continued demand it expects for its internal combustion engine products, Mahindra is bracing itself for an aggressive growth roadmap over the next four to five years.
At an event in the UK earlier this week, the company unveiled its EV vision, forecasting production of 200,000 EVs by 2027, accounting for 30% of its total volume.
This also means that it expects to produce 450,000-500,000 units of fossil fuel vehicles annually by then. It produced nearly a quarter of a million vehicles in the fiscal year ending March 31, 2022, and is projected to nearly double that for 2027.
Speaking on the sidelines of the UK event, executive director Rajesh Jejurikar said Mahindra has an aggressive roadmap for the internal combustion engine as well. It is expecting a compound annual growth rate of 20-25 percent over the next five years.
On whether Mahindra is looking for a dedicated EV plant, Jejurikar said, “One of the criteria to decide is what kind of subsidy we can get from state governments.”
State Soups
Mahindra will keep two to three options open before consolidating its manufacturing strategy, the executive director said. Without naming the states, Jejurikar said the Mumbai-based company has already started discussions with some state governments to set up a new electric vehicle facility.
“It has to be an automotive hub, so we’re moving into a state that has an automotive ecosystem. We now have enough states with ecosystems that are focused on attracting EV investment. We will look at these three to four options,” he said. added
GM India’s factory at Talegaon fits the bill of what Mahindra is looking for in a dedicated EV factory, with a complete automotive ecosystem around it.
One of the factors that could weigh on the GM facility deal is a legal battle between the U.S. automaker and the plant’s labor union. GM India has challenged the Industrial Court’s decision to pay 50% compensation to the workers in the Bombay High Court. On the matter, a GM spokesperson said, “Employees have been legally separated and we are very confident in our legal position.”
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