Shanghai Automotive Industry Corporation (SAIC) is likely to pick up a 50% stake in General Motors India to form an alliance that will assemble SAIC's light trucks in India and source components from China's No. 1 carmaker.
SAIC may also be offered a position on the GM India (GMI) board, said a person with direct knowledge of the deal, which will give the Chinese firm a foothold in the second fastest growing carmarket in the world. He, however , did not divulge the financial details of the transaction.
GMI -- a wholly owned subsidiary of GM, the world's second largest carmaker -- that makes small cars Aveo-Uva , Spark and the soon to be launched Beat will benefit from sourcing cheaper components from China. It will also be able to enter the high-growth light truck market with SAIC's Wuling range of trucks.
The alliance is expected to use GMI's Talegaon manufacturing facility to roll out SAIC small trucks.
GM India spokesman P Balendran declined to confirm the development, terming it as speculation. "We have partnerships with eight companies in China and we keep pursuing and evaluating opportunities with our partners across the world to leverage each other's strengths for technology and product introductions," he said.
"This gives us an opportunity to widen our product portfolio and introduce competitive products in the countries we operate. We keep announcing tie-ups whenever we sign any agreement with our partners," he added.
ET had first reported on the GM India-SAIC partnership in its issue dated October 15. SAIC has been eager to establish a presence in India and is leveraging its equation with GM to form an alliance.
The only possible roadblock to the deal could come in the form of political opposition. In the recent past the government had objected to some investments from Chinese companies as India's relations with China continue their rollercoaster ride.
Lawyers say the government is unlikely to block a deal between car companies, which have no security implications. "China is a WTO signatory and the government cant block this deal unless for security reasons," said a Delhi-based lawyer specialising in WTO-related litigation.
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