Sajjan Jindal, chairman of the JSW Group, and Shanghai-based automobile giant SAIC Motor Corp have reportedly finalised a strategic alliance involving MG Motor India, a wholly owned subsidiary of SAIC.

What Happened: The agreement, which could value MG’s Indian business at around $1 billion, is expected to be formally announced later this month or by Diwali, the Economic Times reported, citing sources. The alliance plans to roll out electric cars by January 2024.

The deal likely entails an initial stake of 32%-35% in MG Motor India for Jindal’s private company, while SAIC will retain 51%. An Indian financial institution will hold an 8% stake, with the remaining 6%-7% owned by Indian dealers and local employees of MG.

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Why It Matters: MG Motors India, currently facing escalating losses, is likely to be valued at ₹7,000 crore-₹8,000 crore, significantly lower than the initial demand of $8 billion-$10 billion. The losses are expected to be eradicated before the launch of an IPO of MG Motors India. This would result in a reduction of Chinese ownership to around 38%-40% over time, and Jindal’s stake would increase to 49%, eventually climbing to 51%.

Once Chinese ownership falls below 49%, MG Motors will no longer be a Chinese entity. The board and management will have a majority of Indian representation, potentially including a new CEO. The deal does not involve any listed entities of the JSW Group. The new alliance will continue to pay royalty to SAIC until the local company develops its own intellectual property and software.

This strategic alliance It will likely not only help MG Motors India recover from its financial losses but will also facilitate the launch of electric cars, contributing to India’s growing focus on environmental sustainability. The deal also signifies a shift in control from Chinese to Indian hands, which could potentially lead to significant changes in the company’s future direction.

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Discalimer: Artificial intelligence was used as a secondary aid in the writing of this article.