Indian automaker Mahindra & Mahindra is teaming up with China's Shaanxi Automobile Group to establish a $3 billion joint venture aimed at setting up a car manufacturing plant in India. The companies are currently awaiting approval from the Indian government, according to sources familiar with the matter.

Mahindra is expected to hold the majority stake in this proposed venture, which plans to establish the manufacturing facility in Gujarat, the home state of Prime Minister Narendra Modi, as revealed by sources directly involved.

The proposal outlines the creation of an export-oriented integrated manufacturing hub. This hub will produce assembled vehicles, commonly referred to as completely built-up units, along with engines and car batteries, according to the sources.

To move forward, Mahindra has sought approval from the Indian government for the Chinese investment involved in this venture.

Both Mahindra and Shaanxi have declined to comment on the matter. Efforts to contact Shaanxi via the contact information provided on their website were unsuccessful. Meanwhile, India's ministries of commerce, heavy industries, and foreign affairs have not yet responded to requests for comment.

The need for government approval stems from India's policy changes in 2020, which imposed stricter controls on Chinese investments following a series of border clashes between the two nations.

This investment proposal emerges at a time when India is considering easing restrictions on Chinese investments in non-sensitive sectors, such as solar panels and battery production, where domestic expertise is limited.

Over the years, several investment proposals, including those from companies like BYD Co Ltd, Great Wall Motor, and SAIC's MG Motor, have been delayed or canceled due to India's rigorous vetting process. Last year, a $1 billion proposal from BYD was put on hold over security concerns.

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