BEIJING, July 31 (TMTPost)— China’s No.1 electric vehicle (EV) company BYD Co., may pull off ambitious expansion efforts in India as the government seems impose more restrictions on Chinese firms.

Credit：Visual China

BYD recently told its Indian partner Megha Engineering and Infrastructures Limited recently that it wanted to drop a plan for a $1 billion investments in a EV joint venture, Reuters reported, citing people familiar with the matte. BYD made the decision after three Indian ministries raised security concerns about investments from the Chinese EV giant and officials signaled objection, according to the report.

Given the tension between China and India, BYD was reported to anticipate political headwinds and have made some efforts to win New Delhi’s approval for its EV venture, such as proposing launch of voice-activated commands for apps in Indian languages in BYD vehicles made in India, and local storage of vehicle data.  In talks with BYD, Megha Engineering, a multi-sector infrastructure company based in Hyderabad, was said to urge its Chinese partner to wait for more clarity on the review before dropping the EV plan.  

BYD was reported to apply for investment of $1 billion to set up an EV venture with Megha Engineering. If Indian government gives BYD the green light, China’s No. 1 EV maker would have its second vehicle production base in India. However, Indian news media outlet reported the EV plan was facing a major hurdle from Indian government soon after the news. The policymakers are not keen to allow BYD’s investment as both the Ministry of Home Affairs and the Ministry of External Affairs felt unease about BYD’s proposal, the Times of India reported. The media noted Indian government has growing concerns that many ventures created by Chinese companies are heavily weighed and controlled by the foreign partner, while their Indian co-founders look like a dummy entity. A separate report of the media later said BYD’s proposal was rejected, citing officials’ remark that security concerns about Chinese investments in India were flagged during authorities’ deliberations.

The Indian government has reinforced their scrutiny on foreign investors in the name of national security. New Delhi has tightened regulation on investments from neighboring countries in 2020. Chinese smartphone manufacturers such as Xiaomi, OPPO, realme, and Vivo were asked by authorities to appoint Indian nationals as executives like CEO, chief operating officer (CPO), chief financial officer (CFO) and chief technical officer (CTO), the Economic Times, an Indian newspaper, reported in June. These phone makers were also required to introduce Indian equity partners in their Indian businesses, appoint Indian contract manufacturers, increase local manufacturing down to the component level through joint ventures with local businesses, expand exports from the Southern Asian country and have local distributors, according to the report.

The news about BYD’s domestic peer Great Wall Motor also suggested how hard a Chinese business to expand in India amid the regulatory tightening-up.

General Motors (GM) announced in the beginning of July that it had abandoned sale of a collapsed Indian plant to Great Wall Motor due to failure to obtain the approvals within the timeline of their deal. GM reached a sales deal in January 2020 with Great Wall for up to US$300 million, as part of a broader plan for the Chinese automaker to foray into India’s car market. Reuters commented that GM’s deal with Great Wall became the first casualty of New Delhi’s tightening grip on investments from China and other neighbors, curbing billions of dollars capital inflow in sectors like automobile and technology.

Days after GM’s announcement, Great Wall was reported to shelf its plan to invest US$1 billion in India due to the stricter rules. The company was said to lay off about a dozen people at its Indian business, affecting jobs on its planned India entry in departments including finance, strategy and marketing.

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