Sona Comstar enters China EV parts market amid tariff, rare earth hit
The Gurugram-based firm will invest $12 million in the joint venture and hold a 60% stake, while its Chinese partner will contribute $8 million, according to a company statement. The JV will provide driveline components to Chinese and global OEMs (original equipment manufacturers).
The joint venture is expected to start operations in the second half of the current financial year.
The country's eighth-largest component maker's management highlighted a look-east approach to business in its latest annual report, anticipating a hit to revenue in the North American region.
"This joint venture marks a significant step in our strategy to expand into the rapidly growing Asian markets. As the largest electric vehicle market in the world and a leader in EV technologies, China offers tremendous opportunities for innovation and growth," Vivek Vikram Singh, managing director and chief executive officer (CEO) of Sona Comstar, said.
According to the company's presentation on the move, the joint venture will have five board members, the majority of whom will be appointed by Sona Comstar.
In the financial year 2025, the company received 41% of its overall ₹ 3,555 crore revenue from the North American region, 29% from India, and only 6% from the rest of the Asian region.
Among vehicle technologies, 36% of its revenue came from battery electric vehicles, the highest for a component maker in the country.
Singh told analysts in the last earnings call that the company can face a 3% revenue hit in the North American region. However, the company's entry into China, the world's largest EV market, can help offset the adverse impact on business.
With 11.3 million electric vehicles sold in China in 2024, China held a 66% share in the global EV market. About 76% of the Chinese electric vehicle market is held by domestic manufacturers, including BYD, NIO, Geely and XPeng, among others.
The entry into the region is part of the firm's broader strategy of increasing its focus on Asia.
"In addition to growing market shares in North America and Europe, we will increase our focus on Eastern markets, particularly India, China, Japan, and Korea," Sona Comstar said in its latest annual report.
"This may necessitate adaptations to our operating model, including the possibility of forming joint ventures or alliances. By concentrating more on these Asian markets, we aim to achieve a balanced geographical diversification in our revenue," it added.
According to the company's statement, Jinnaite Machinery manufactures complex castings and moulds and is a supplier to major Chinese companies and firms in North America, Europe, and Japan.
The announcement of Sona Comstar's joint venture in China comes at a time when the country is facing export restrictions imposed by China on rare earth magnets. As one of the largest manufacturers of motors for EVs, Sona Comstar is among the players facing restrictions on the import of rare earth magnets.
The company has developed new solutions, such as light rare-earth magnet motors and magnet-free motors, to counter China's restrictions. However, the new solutions are currently in the testing phase.
Sona Comstar's share price has declined by 19% so far compared with a 3% rise in Nifty Auto.
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