top of page
  • InduQin

Partnership pays: Many Chinese firms are forming joint ventures with Indian players—that’s the way to go

None of the Chinese players had participated in the PLI scheme.

After the border conflicts in 2020, India became even more staunch in its opposition to Chinese investments. A different approach was used with respect to the industrial firms, despite the drastic decision to prohibit all Chinese apps (at the time, the short video app TikTok was extremely popular). Foreign direct investment standards were tightened because Chinese firms had established strong footholds in industries like as mobile phones and cars. The government changed the rules so that countries sharing a land border with India must now obtain prior approval before bringing more investments, even though these industries are under the automatic route. Great Wall Motor of China was the first to fall; the company had planned to buy GM's plant in Talegaon, Pune, but regulatory clearances never materialized.

Although both domestic and international companies had solid footing in the automotive industry, the restrictions imposed on Chinese automakers had little effect on sales. However, things were different with mobile phones. All of the major Chinese manufacturers had assembly operations in the country, thus they controlled the market. Not only did the government encourage Chinese companies to open up their supply chain, but it also announced a production-linked incentive (PLI) scheme for smartphones in 2020, which led to Apple establishing a manufacturing base in the country.

The PLI strategy had no involvement from any of the Chinese players. They solely served the local market, and all links in their supply chain, from manufacturers to distributors, were Chinese companies. The network was private. Open your network to domestic players and start exporting from the country—that was the unambiguous signal from the government. During this time, investigators have documented multiple instances of potential tax and currency law crimes by some of the participants. This time around, the government's plan appears to be paying off. For the production of its phones, Xiaomi has already inked deals with two domestic contract manufacturers, Dixon and Optiemus. Several major players are reportedly in the midst of outsourcing their manufacturing to domestic players, including Oppo, Vivo, Realme, and One Plus. Both domestic players and consumers benefit from these kinds of cooperation. Even though Apple and Samsung have production facilities in the country, their combined market share is just about 25%, meaning that most of the market is supplied by Chinese companies. All parties involved will reap the benefits of technology, marketing, and production pacts.

Even in the automotive industry, a comparable shift is occurring. Although Great Wall Motor had to scrap its ambitions, MG Motors of China was able to keep going. With the use of technology and products provided by SAIC, the parent company of MG, the business has established a separate joint venture with JSW Group, owned by Sajjan Jindal, to produce electric vehicles. Customers love Chinese manufacturers because they have the technology and their products are affordable. It would be mutually beneficial if companies with a presence in India could split ties with their Chinese parent company by entering into joint ventures with Indian companies and opening up their supply chains. Neither India nor their company can afford to disregard the Indian market, especially now that they've established a rapport with the locals. Both parties appear to have come to the realization, over time, that a partnership is the best way ahead.

9 views0 comments


bottom of page