BYD Explores Local Assembly in India to Address Surging EV Demand and Regulatory Challenges
Chinese automotive giant BYD Co. is actively considering establishing local assembly operations in India as demand for its electric vehicles begins to significantly outstrip current supply capabilities. According to sources familiar with the matter, the company is evaluating various forms of local assembly and working diligently to obtain necessary safety and regulatory certifications for additional models.
Strategic Shift After Previous Regulatory Setbacks
This potential expansion represents a notable strategic shift for BYD, which previously faced rejection from Indian authorities regarding proposals for a full assembly plant in the country. The company is now exploring alternative approaches, including the assembly of semi-knocked-down (SKD) components, which would offer both cost advantages and potentially smoother regulatory clearance processes.
The move follows visits by senior BYD executives to India and reflects the automaker's determination to strengthen its presence in one of the world's fastest-growing automotive markets. Despite past regulatory hurdles during a period of heightened scrutiny of Chinese investments, BYD appears to be doubling down on its Indian market strategy.
Overcoming Import Quotas and Tariff Barriers
BYD's sales in India experienced remarkable growth last year, jumping approximately 88% to roughly 5,500 vehicles. This surge has strained the company's ability to operate effectively under India's import regulations, which cap fully built imports of each model at 2,500 units annually.
The company currently sells several models in the Indian market, including the Atto 3 compact e-SUV, the eMax7 multipurpose vehicle, the Sealion 7, and the Seal sedan. While the Atto 3 and eMax7 have received approval for imports beyond the standard quota, the overall import limitations present significant growth constraints.
Transitioning to local assembly would provide substantial tariff advantages for BYD. Currently, fully built cars face import duties as high as 110%, while SKD assembly would reduce applicable tariffs to approximately 30% from the current 70% rate for certain components.
Competitive Positioning Against Tesla and Domestic Rivals
BYD has managed to establish a competitive position in India's premium mass-market EV segment despite these challenges. The Atto 3 starts at 2.5 million rupees (approximately $27,255) even with the 70% import tariff, positioning it alongside offerings from domestic manufacturers Mahindra & Mahindra Ltd. and Tata Motors Passenger Vehicles Ltd.
Notably, BYD continues to undercut Tesla's pricing in the Indian market. The Sealion 7, which sold 2,200 units in India last year, is priced between 4.9 million to 5.5 million rupees, significantly below Tesla's Model Y, which starts at 6 million rupees.
This pricing advantage has contributed to strong demand, with dealers reportedly sitting on hundreds of bookings and most inventory from the December quarter already sold out. This stands in sharp contrast to Tesla's experience in India, where the company has reportedly been offering discounts on some variants to stimulate sales.
Geopolitical Context and Future Prospects
The potential expansion comes amid a tentative thaw in India-China relations following a period of heightened tensions. While direct flights between the two countries have resumed, policy support for Chinese investments remains inconsistent and subject to ongoing scrutiny.
BYD has approached Indian automotive regulators to highlight how current import limitations could constrain the company's growth potential in the market. The automaker's diversification strategy beyond China has become increasingly important as domestic growth slows amid reduced EV subsidies and intensifying competition in its home market.
Some BYD executives, including engineers and senior managers, have been visiting India since last year, though planned visits by more senior executives have reportedly been delayed. The company aims to increase deliveries to markets outside China by nearly 25% this year, with India representing a crucial component of this international expansion strategy.
