M&M, Ford offer excess capacities to Chinese carmakers eyeing India

nNEWDELHI/MUMBAI:MAHINDRA and Mahindra Ltd (M&M) and Ford India Pvt. Ltd are in joint talks with two Chinese automakers for potential contract manufacturing deals to utilize their excess production capacities, said two people aware of the development.

The move comes at a time when Chinese firms are seeking to make deeper inroads into India, the world’s fourth-largest automobile market. MG Motor India Pvt. Ltd, a unit of China’s SAIC Motor Corp. Ltd and the first Chinese automaker to manufacture vehicles in India, faced a strong customer response since it began selling vehicles in June last year.

Great Wall Motor Co. Ltd recently acquired General Motors Co.’s auto plant in Maharashtra. State-run Changan Automobile Co. Ltd and FAW Group Corp., are also scouting for local partners to set up their India operations. FAW has already collaborated with Bird Group, a diversified business entity, to start its India operations.

The first person cited above said some of the Chinese companies don’t want to make large investments in their initial phases since India is an uncharted territory. A contract manufacturing agreement therefore suits their business plans, the person said requesting anonymity. “Unlike a Great Wall, most of them are looking at very modest volumes and are looking at some ready-made solution rather than putting up a green-field or brownfield plants,” added the person requesting anonymity.

The second person cited above said some of the Chinese companies are looking at annual volumes of less than 50,000 vehicles, which fits in with their contract manufacturing plans. Both the persons declined to name the two Chinese automakers.the talks are at an initial level and may not fructify into anything concrete since these companies have to accept the amount that will be charged by M&M and Ford.