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MG Motor India, owned by China's SAIC Motor, said the Indian government sent a notice asking for the reason for the automaker's losses in 2019-2020, its first year of operations in the country, a move that Bloomberg reported was over alleged financial irregularities.

India's Ministry of Corporate Affairs started the probe after an analysis of MG Motor India's statements indicated suspicious related-party transactions, alleged tax evasion, under- and over-invoicing of bills and other irregularities, Bloomberg reported, citing people with knowledge of the matter.

MG Motor India said it is providing required records and information to the MCA, and added that it adhered to Indian accounting standards, but made no direct reference to any allegations of financial irregularities.

"It is impossible for any automobile company to be profitable in the very first year of its operations," MG Motor India said in its statement.

"This is because of the huge capital expenditure investment required and the long gestation period in a highly competitive market."

The MCA and Deloitte, MG Motor India's auditor, did not immediately respond to Reuters' requests for comment.

The probe comes at a time when many Chinese firms have struggled to do business in India after political tension surged following a border clash in 2020. India has cited security concerns, banning more than 300 Chinese apps since then and toughening rules on Chinese investment.

Reuters reported in March that MG Motor India was planning to raise funds to develop its Indian electric mobility business.

The company, which entered India in 2019, sold about 3,500 cars a month on average in the country in 2021, giving it a market share of around 1%, industry data showed.