Under Lens For Security Risk, China's BYD Likely To Pull The Plug On $1 Bn EV Investment In India: Report

China's BYD, in partnership with Hyderabad's Megha Engineering and Infrastructures, had earlier submitted a proposal to jointly manufacture electric cars in India in April.

The decision comes after the Chinese EV maker's proposal reportedly faced scrutiny from the government.

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China's BYD intends to halt its plans for a $1 billion investment in building electric cars in India. The decision comes after the electric vehicle (EV) maker's proposal reportedly faced scrutiny from the government. BYD, in partnership with Hyderabad's Megha Engineering and Infrastructures, submitted a proposal to jointly manufacture electric cars in the country in April.

According to a Reuters report, BYD executives last week told Megha Engineering that they wanted to drop the pursuit of the investment. The report citing two people with knowledge of that exchange said that although there is no immediate clarity on whether BYD could have second thoughts. Additionally, the proposed investment plan is still under government review. 

As per the report, during the initial review, officials from three ministries, including finance and external affairs, raised security concerns about investment from the Chinese company and signalled opposition. 

BYD in a statement to Reuters said it has had a presence in India for 16 years, selling both passenger cars and electric-drive buses.

As per the report, Megha Engineering has advised BYD to hold off on dropping the electric car manufacturing plan until more clarity is obtained regarding the situation. BYD was aware that its investment proposal could be politically sensitive due to the scrutiny of Chinese investments in India, and the company had made efforts to address potential concerns. 

As part of the proposal, BYD planned to offer voice-activated commands for apps in Indian languages in their electric cars manufactured in India. Additionally, all data from the vehicles would be stored within India, the report said. 

BYD had proposed starting production in India by 2025. 

India began closely scrutinizing Chinese investments after 2020 due to border clashes between the two countries. Great Wall Motor of China had to abandon its $1 billion investment plans in India due to a lack of clearance from the government. The final decision on BYD's investment proposal will be taken by Indian ministries of trade and heavy industries.

BYD entered the Indian market in 2007, producing batteries and components for mobile phones. Later, in 2013, it started manufacturing electric buses in India through its joint venture with Megha Engineering called Olectra Greentech. BYD has already invested over $200 million in India and offers the Atto 3 electric SUV and e6 EV to corporate fleets. It plans to introduce its Seal electric sedan later this year.

India's electric vehicle market is growing, with Tata Motors being a dominant domestic automaker. Although electric models constituted less than 2 per cent of total car sales in 2022, the government aims to increase this to 30 per cent by 2030.