BYD, China’s largest automobile manufacturer, might drop its plans of investing $1 billion in India for manufacturing and selling electric vehicles locally. The possibility has been raised in a recent report that sources knowledge from people aware of the matter. It points out the scrutiny of the Indian government against investments from Chinese firms due to security reasons, as the reason behind BYD likely pulling out of its investment.

The monumental amount, which translates to Rs 8,000 crore in Indian Rupees, was earlier meant to set up an electric car manufacturing plant in India by BYD in a joint venture with Megha Engineering and Infrastructures as its Indian partner. The JV had submitted a proposal to the Indian government in April for the same. A new report by Reuters now states that security concerns were raised by some officials of Indian ministries over the possible investment and subsequent operations.

As per the report, two people aware of the matter suggest that BYD executives have already told Megha Engineering that they intend to drop the idea of such an investment in India. Though the report highlights that BYD has not officially withdrawn the investment proposal from government review as of now. BYD, Megha Engineering, or the ministries of the Indian government have refused to comment on the matter as of now.

BYD’s pullback comes after an initial review by the Indian ministries on the proposal. The Reuters report mentions that security concerns were raised about the investments from the Chinese firm by officials from three Indian ministries, including finance and external affairs. Megha Engineering has now urged BYD to wait for more clarity on the issue before dropping its investment plans in India altogether.

BYD likely was aware of the possible scrutiny, considering the Indian government’s stringent stance on all forms of investments from China following a series of border rifts between the neighbouring countries since 2020. Its proposal to the Indian government had even highlighted sections to assure data security and eliminate other such concerns, the people aware of the matter pointed out.

BYD had earlier planned to start electric car production in India by 2025. It already sells the Atto 3 electric SUV and the e6 EV in India and plans to launch its Seal electric sedan later this year. It remains to be seen how the Indian government responds to its proposal and whether the company is able to locally produce electric cars in the country or not.