Fazed by the recent directive by the government on scrutinization of Chinese investments in the country, Chery Automobile Co. Ltd has paused it plans to buy any stake in Tata Motors’ PV unit, revealed by sources privy to the development. It was reported earlier that the Indian automaker was intending to hive off its carmaking vertical and was also scouting for a strategic partner who can buy up to 49% stake as well as collaborate for product development and electric powertrain solutions.
However, if sources are to be believed, the current geopolitical tensions are dissuading the Chinese state-owned firm to execute any transaction with BSE-listed firm in the near to medium term. Speculation is also pretty rife that the Wuhu, Anhui province-based firm may make an independent foray into India and eventually go for joint product development with the Mumbai-based firm.
“People’s Bank of China (PBOC) acquiring a minor stake of 1.01% in the Housing Development Finance Corporation (HDFC) lead to some knee-jerk reactions by the Indian government. So just imagine the consequences will be if a state-owned Chinese entity buys a 49% stake of another Indian listed entity? So there have been no talks between Chery and Tata Motors over the last 15-20 days. Both have mutually decided to revive talks only when the anti-Chinese sentiments wane,” revealed a well-informed source requesting anonymity.
While Chery global spokesperson could not be contacted by BW Businessworld to elicit any response, Tata Motors spokesperson, when contacted, maintained, “As you are aware, we do not comment on speculation. Accordingly, we have refrained from offering any comments to similar queries in the past and will not be making any comments this time too.
Media reports had earlier maintained that Chery was in advanced talks with Tata Motors Ltd for a potential alliance for the Indian market. State-owned Chery had already inked a a JV with Tata Motors-owned Jaguar and Land Rover in 2012 to make luxury cars in China. The partnership enabled Jaguar Land Rover open their first assembly facility in Changshu, China in October 2014.
Puneet Gupta, Associate Director, IHS Markit, stated, Tata Motors hived off passenger car unit clearly reflected that company is looking for a strategic partnership in passenger vehicles business. After Covid19 and too many uncertainties around, there are severe cashflow issues with Tata Motors too. However, with globalization era coming to end after Covid 19 and growing trade tensions among China and US may derail the process for Tata motors finding a right partner for few months.”
It is to be mentioned that Chery Automobile Co. Ltd was founded by the government of China in 1997 and its principal products are passenger cars, minivans, and SUVs. While it sells passenger cars under the Chery marque and commercial vehicles under the Karry brand. Chery now has several vehicle assembly and component manufacturing facilities in mainland China, and its vehicles are assembled in around 15 other countries—primarily in factories not owned by the company that use either complete or semi complete knock-down kits. Its QQ city car, considered to be the best-known Chery models till date.
“If Chery is actually planning to invest in Tata Motors PVBU it will be a win-win - the Chinese brand gets a foothold in India and the Indian brand finally gets some cash and technology to survive. Right now, given the "anti-China" sentiment all over the country, Chery would prefer to lie low till these clouds pass by. One cannot judge an entire nation and its people and businesses by one incident or a certain government. By that logic the world should not have bought any German product after the 2nd World War, be in a Mercedes-Benz or a Grundig. Allow heated tempers to cool down over the next 5-6 months and Chery and Tata Motors would be back on the negotiating table again,” maintains Avik Chattopadhyay, co-founder at brand consulting firm Expereal