Chinese auto company MG Motor India is eyeing idle capacity at the Volkswagen plant for contract manufacturing. MG Motor India is a subsidiary of SAIC, a Chinese auto giant.

With investments through the FDI route subject to maximum scrutiny from the government following the border standoff with the Chinese , MG Motor India is in talks with Volkswagen Group India to lease out their idle capacity in plants for contract manufacturing. Talks are in advanced stages with Volkswagen who is a partner of SAIC, said sources.

The capacity at MG India’s Halol plant stands at 1 lakh unit per annum. At present, the capacity utilisation stands at 50 per cent. About 3,000 units of the Hector are manufactured there. The ZS EV and the Gloster SUV, launched recently, are assembled in India.

“It makes sense for the company to go for brownfield projects than greenfield plans. The investment is much less. For a greenfield plant, the investment required would be worth Rs 6,000 crore. But to take on lease idle capacity, the company needs to pay around Rs 2,000 crore,” said a source.

As Volkswagen is a partner of SAIC, it is logical that the German company will help out MG India, a source said.