Chinese electric vehicle maker BYD will have to wait longer to push ahead with its manufacturing plans in India despite the government’s decision to ease some restrictions on investments from countries sharing a land border with India. The latest relaxation of the rules under Press Note 3 does not extend to electric vehicle manufacturing, meaning proposals from Chinese EV makers will continue to require full government scrutiny.
Officials said the changes approved by the Union Cabinet are aimed primarily at speeding up investments in specific manufacturing inputs rather than allowing entry of Chinese firms into finished vehicle production. As a result, large investment proposals such as BYD’s plan to set up a manufacturing facility in India are unlikely to see any immediate benefit from the policy change.
Calibrated Ease
The government on Tuesday amended the investment framework governing entities from neighbouring countries by allowing non-controlling beneficial ownership of up to 10% through the automatic route. Such investments will be permitted as long as they do not involve management control and remain within the sectoral caps already defined under the foreign investment policy.
Critical Manufacturing Inputs
At the same time, the government has introduced a fast-track mechanism for investment proposals in certain manufacturing segments that are considered critical for building domestic supply chains. Under the revised framework, proposals from investors in land-border countries in selected sectors will be processed within 60 days.
The sectors currently covered under the fast-track route include capital goods manufacturing, electronic capital goods, electronic components, and production of polysilicon and ingot wafers. These areas are closely linked to electronics, semiconductor and renewable energy supply chains where India is seeking to strengthen domestic manufacturing capacity.
Officials said the decision reflects a calibrated attempt to balance investment facilitation with security considerations.
The restrictions stem from Press Note 3 issued in April 2020, which requires prior government approval for investments from entities based in countries sharing a land border with India. The rule also applies to transfers of ownership that result in beneficial ownership shifting to investors from these jurisdictions.
The curbs have already affected several investment proposals from Chinese automakers. In 2022, China’s Great Wall Motor withdrew plans to invest about $1 billion in India after regulatory approvals did not materialise. In 2023, the government rejected a similar $1 billion investment proposal by BYD citing security concerns.
However, the government has retained flexibility to expand the scope of the fast-track mechanism. The Cabinet Secretary-led committee of secretaries has been empowered to add new sectors to the list of eligible industries if required.
Industry executives said the changes could still benefit upstream supply chains such as battery materials, electronic components and other inputs used in electric mobility and electronics production.
