Chinese EV giant BYD Motors’ plan to establish an electric vehicle manufacturing facility in India has faced a setback as the Indian government rejected the proposal citing “security concerns.” BYD Motors, in collaboration with Megha Engineering and Infrastructures Ltd (MEIL) based in Hyderabad, had intended to invest $1 billion in setting up a four-wheeler manufacturing facility in India.
According to an official familiar with the matter who spoke to news agencies, “Security concerns with respect to Chinese investments in India were flagged during the deliberations.” Another official stated that the current guidelines do not allow for such investments.
The joint venture between BYD and MEIL had submitted a comprehensive proposal to the Department for Promotion of Industry and Internal Trade (DPIIT) to manufacture 15,000 electric cars annually. MEIL was responsible for providing financial support, while the technology and know-how were to be sourced from the Chinese company.
The rejection from the Indian government regarding BYD’s manufacturing ambitions has resulted in the company missing a golden opportunity to capitalize on the burgeoning electric vehicle market in the country.
Although BYD has the option to import cars into India that are already manufactured and assembled in China, the final prices of these vehicles in India may not be attractive to Indian consumers. Despite potential cost reductions in manufacturing, import taxes, registration charges, and other factors would likely increase the prices significantly in the Indian market.
No to Chinese Companies’ Investments
In the aftermath of the 2020 border skirmishes with China, the Indian government has been vigilant and suspicious of all Chinese investment activities and ambitions in the country. Starting from April 2020, companies from neighbouring nations sharing a land border with India are required to obtain approval before investing in Indian companies.
To ensure compliance, a committee led by the home secretary must give its approval before such proposals can proceed. This mandatory step was implemented to prevent Chinese entities from circumventing regulations and acquiring companies in India, particularly in the context of the Covid-19 pandemic and border tensions between the two nations.
BYD’s current approach involves importing semi-finished cars from China and assembling them in Tamil Nadu, India, for local sales. However, this method has proven to be costly and poses challenges in the Indian market, where both quality and pricing play crucial roles in consumers’ decision-making.
In January, BYD India, the Indian subsidiary of BYD, announced its ambitious plan to sell approximately 15,000 cars in the current calendar year.
Addressing the market gap for premium electric sedans, Sanjay Gopalakrishnan, Senior Vice President of BYD India, emphasized that they aim to cater to individuals who seek value for the price they pay. This target audience includes entrepreneurs, businessmen, young IT professionals, unicorn founders, and even luxury car owners who are interested in embracing electric vehicles.
