Mahindra & Mahindra is exploring the possibility of acquiring US carmaker General Motors’ factory at Talegaon in Maharashtra, soon after another Indian automaker, Tata Motors, agreed to take over Ford’s plant in Gujarat.
People in the know said Mahindra executives made several visits to the Talegaon facility in the past few weeks. 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.
Apart from Mahindra, British brand MG Motor too has shown interest in the GM factory, a person close to the matter said.
However, GM may give it a lower priority because MG Motor’s investment could face more scrutiny and take more time in India due to its Chinese ownership, one of the reasons why Great Wall dropped out of the talks. Mahindra declined to comment, while MG Motor did not respond to an email seeking comment.
Mahindra Considering Strategic Buy
A GM India spokesperson did not offer any specific comment on Mahindra or MG but said, “GM is continuing to explore options for the sale of the site.”
If talks between Mahindra and GM lead to a deal, it would be the second case of a homegrown company helping a US automaker 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 its announcement of leaving India in September, last year, GM is still looking for a buyer for the facility five years after exiting this market.
Earlier this month, Tata Motors announced the acquisition of the Ford plant for a little less than $100 million. GM may sell its facility for $60-75 million, or under Rs 600 crore, the people said.
Getting a factory in working condition – GM has been using it till December 2020 to make cars for exports – will help Mahindra accelerate its expansion plan. The manufacturer of the XUV 700 and Scorpio N SUVs is sitting on pending bookings for about 240,000 vehicles with waiting periods of 12-18 months on some of its models.
Building a new facility to produce a quarter million passenger vehicles requires an investment of Rs 4,000-5,000 crore and an additional Rs 7,000-8,000 crore for the ancillary ecosystem. According to experts, if Mahindra is able to purchase GM India’s plant even for less than Rs 1,000 crore, it would be cost effective.
The GM spokesperson said the facility “remains a well-maintained, state-of-the-art industrial site, with strong linkages into supply chain and transport networks.”
Mahindra has announced capacity expansion at its existing factory in Chakan. GM’s Talegaon plant is just about 20 km from Chakan.
Electric Push
It may also look at acquiring the plant under the newly formed electric vehicle (EV) subsidiary, which got a nearly $250-million investment from British Investment Co at a valuation of $9.1 billion.
Given a strong ambition in the EV business and sustained demand it expects for the internal combustion engine products, Mahindra is readying itself for an aggressive road map of growth in the coming four to five years.
At an event earlier this week in the UK, the company unveiled its EV vision, forecasting production of 200,000 EVs, accounting for 30% of its total volumes, by 2027.
This also means it is expecting to manufacture 450,000-500,000 units a year of fossil-fuel powered vehicles by that time. It had manufactured nearly a quarter million vehicles in the fiscal year ended March 31, 2022, and the projection for 2027 is almost double that.
Speaking on the sidelines of the UK event, executive director Rajesh Jejurikar said Mahindra had an aggressive road map even for the internal combustion engine. It is expecting a compounded annual growth rate of 20-25% in the next five years.
On whether Mahindra was looking for a dedicated EV plant, Jejurikar said, “One of the criteria to make that decision is the kind of subsidies we may get from the state governments.”
State Sops
Mahindra will keep two to three options open before firming up its manufacturing strategy, said the executive director. The Mumbai-based company has already started discussions with a few state governments on setting up a new electric vehicle facility, said Jejurikar, without naming the states.
“It has to be an automotive hub, so we are going to the state where there is an automotive ecosystem. We have enough states now with such ecosystems which are focusing on attracting EV investments. We will evaluate those three to four options,” he added.
GM India’s factory in Talegaon fits the bill of what Mahindra is looking out for in a specific EV factory, with a full-fledged automotive ecosystem around it.
One of the factors that could weigh on a deal for the GM facility is a legal battle between the US automaker and workers’ union at the plant. GM India has challenged in the Bombay High Court an industrial court’s ruling to pay workers 50% compensation. On this issue, the GM spokesperson said, “Employees have been legally separated and we remain very confident of our legal position.”
