Indian Govt starts probing MG Motors for financial irregularities

In a shocking turn of events, the Ministry of Corporate Affairs of the Central Government of India has issued a probe against MG Motor India Pvt Ltd over alleged financial irregularities. A subsidiary of the Chinese carmaker SAIC Motor Corp, MG Motor India Pvt Ltd has been operating in India since 2019. This probe issued against MG Motors has once again brought attention to the Chinese firms operating in the country.

The probe issued on MG Motor India Pvt Ltd by the Ministry of Corporate Affairs will address the various allegations imposed on the company. It includes alleged tax evasion, under and over-invoicing of bills and other irregularities. There are also allegations of MG Motor India Pvt Ltd involved in suspicious related-party transactions, which has brought the company under scrutiny for the alleged connections with China. The Ministry of Corporate Affairs has summoned the top management of MG Motor India Pvt Ltd next month, including the managing director, other directors and auditors of the company for more clarification on the matter.

In the past, similar actions have been executed against the local units of various Chinese companies operating in India, such as Xiaomi Corp, ZTE Corp, Oppo and Vivo Mobile Communications. The scrutiny of Chinese companies or their subsidiaries operating in India has deepened ever since the tensions between India and China rose in 2020, following the fights and hostility on the borders of both nations.

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MG Motors official response

In response to the summon issued by the Ministry of Corporate Affairs, MG Motor India Pvt Ltd has released an official statement, in which it has clarified its stand on the matter. The company has said that it will be cooperating with all the government authorities, and will be producing all the required records and information to clarify its side within the given time frame.

Speaking on the allegations of deliberately posting operational losses in the first year of its business in India, the company has said that no automotive company can score profits in the first year of its business. The company further added that India is a highly competitive market, where many other companies have struggled to find a foothold for decades, for which huge Capex investment is required in the initial days. While MG has released an official statement on the issue, the Ministry of Corporate Affairs is yet to respond to the matter.

Since 2020, the Indian Government led by Prime Minister Narendra Modi has been strict in its actions against Chinese companies and mobile applications. Several services from Chinese firms like Alibaba Group and ByteDance have been banned in the country. Apart from that, the government is also investigating the accounts of more than 500 Chinese companies for their alleged illegal cross-border financial transactions.

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