Chinese electric vehicle (EV) giant BYD will need to wait longer before moving forward with its manufacturing ambitions in India. Despite the Indian government relaxing certain investment restrictions for entities from countries that share a land border with India, the latest adjustments under Press Note 3 do not cover electric vehicle manufacturing. Consequently, proposals from Chinese EV manufacturers will still undergo rigorous government scrutiny.
The recent changes, approved by the Union Cabinet, are designed to accelerate investments in specific manufacturing inputs rather than permitting Chinese firms to enter the finished vehicle production space. Therefore, major investment plans—like BYD’s proposal to establish a manufacturing facility in India—are not expected to benefit immediately from this policy shift.
On Tuesday, the government modified the investment framework for entities from neighbouring countries. It now permits non-controlling beneficial ownership of up to 10% through the automatic route. These investments are allowed provided they don’t involve management control and stay within the existing sectoral caps outlined in the foreign investment policy.
In addition, India has introduced a fast-track mechanism for investment proposals in select manufacturing segments vital to developing domestic supply chains. Under the updated framework, investment proposals from investors based in land-border countries in certain sectors will be processed within 60 days.
The sectors included in this fast-track route are:
These areas are essential to electronics, semiconductor, and renewable energy supply chains—sectors where India aims to bolster domestic manufacturing capabilities.
Officials clarify that this decision represents a measured approach to reconcile investment facilitation with national security concerns. The restrictions originate from Press Note 3, issued in April 2020, which mandates prior government approval for investments from entities in countries sharing a land border with India. This rule also applies to ownership transfers that result in beneficial ownership shifting to investors from such jurisdictions.
These regulations have already impacted several investment proposals from Chinese automakers. In 2022, China’s Great Wall Motor withdrew its $1 billion investment plan in India when regulatory approvals failed to materialise. In 2023, the government rejected a similar $1 billion investment proposal from BYD, citing security concerns.
Although BYD’s immediate plans are stalled, the government has retained the flexibility to broaden the fast-track mechanism. A Cabinet Secretary-led committee of secretaries has the authority to add new sectors to the list of eligible industries as needed.
Industry experts suggest that while BYD and other Chinese EV manufacturers face delays, the revised policy could still support upstream supply chains. Sectors such as battery materials, electronic components, and other inputs used in electric mobility and electronics production may see positive impacts from these changes.