BYD, China's ambitious electric vehicle (EV) giant, recently encountered roadblocks in its international expansion, specifically in India. According to recent reports, BYD has decided to suspend its plan to invest $1 billion in building an electric car factory in India, a decision which has been conveyed to its local partner, Megha Engineering.
Megha has urged BYD to reconsider this decision, however, BYD has yet to officially respond. But the troubles don't end there. On August 2, the Indian Directorate of Revenue Intelligence (DRI) initiated an investigation into BYD for possible underpayment of taxes on certain car models sold in India.
When asked about these matters on August 4, a BYD investor relations representative deferred to official company announcements regarding the investment situation in India. They offered no immediate comment on the ongoing tax investigation.
Sources close to BYD argue that the company's plans for the Indian market are long-term, and such matters must be approached with patience. This echoes the experiences of smartphone manufacturers like Xiaomi and Vivo in India, casting a shadow over BYD Chairman Wang Chuanfu's dreams of dominating the Indian market.
India's allure as a market is undeniable for BYD. As per data from the Society of Indian Automobile Manufacturers (SIAM), approximately 4.725 million new cars were sold in India in 2022, making it the third-largest car consumer market globally, only surpassed by China and the U.S.
While EVs made up less than 1% of India's car sales last year, the Indian government plans to increase this to 30% by 2030. Based on 2022's figures, this would mean India would have over 1.42 million electric vehicles on the road by then.
Sanjay Gopalakrishnan, BYD India's senior vice president for electric passenger vehicles, stated publicly in January that the company hopes to capture 40% of India's electric car market by 2030. That equates to approximately 570,000 cars, which is half of BYD's sales in China in the first half of this year, making the opportunity tantalizing for BYD.
Currently, BYD has one factory in India manufacturing the E6 model, which is primarily targeted at the ride-hailing market. But BYD hopes to achieve a higher market share in the consumer market. When announcing its entry into India's passenger car market in October last year, Zhang Jie, the general manager of BYD India, stated plans to establish a new production base in India in 2023.
The Competition and the Challenges
This puts pressure on BYD's factory-building plans as Tesla is also discussing investments with the Indian government. Tesla plans to open a factory with an annual capacity of approximately 500,000 cars, which will produce a car targeted at the mainstream market, priced around 175,000 yuan (approximately $27,000). This Tesla model will be a direct competitor with the cars that BYD plans to produce and sell in India.
Whoever can first crack open the Indian market will be able to gain an early market advantage, build a brand effect, and gain a head start against the competition. This is analogous to when Tesla first entered China. When consumers thought about electric car brands, the first name that came to mind was Tesla.
Given this, the Indian market is a tough nut to crack for Wang Chuanfu, but its potential cannot be ignored. Other Chinese automakers have had similar experiences. In 2020, Great Wall Motor proposed to acquire a General Motors factory in India for $300 million, but failed to get approval from the Indian regulatory authorities.
The Road Ahead
The question of how to successfully establish a factory in India tests the acumen of many entrepreneurs. Liu Xiaoxue, associate researcher at the Institute of Asia-Pacific and Global Strategy of the Chinese Academy of Social Sciences, analyzed that the Indian government has learned lessons from Chinese phone manufacturers investing in India, and thus limited the investment of Chinese automakers to a certain extent.
If car manufacturers want to take a share of the Indian market, they might follow Apple's example, encouraging their own suppliers to enter the Indian market through joint ventures. However, the question remains whether suppliers are truly willing to follow their clients and establish factories in India, even for Tesla.
Automakers currently investing in India's new energy vehicle market face a dilemma. In the short term, India's local new energy industry chain is not complete, and many parts still need to be imported. However, these companies are also dealing with complex domestic and foreign tax issues in India. If the Indian government does not flexibly adjust its policies, it could hinder automakers interested in investing in India.
Despite the challenges, the Indian market remains an irresistible opportunity for any automaker looking to globalize. In comparison with many other countries, India's overall social environment is stable, making it a good choice for building factories, and there is also potential for consumer growth, ensuring corporate profits. However, understanding local regulations and tax issues is key. As the saying goes, "where there's a will, there's a way."
For many Chinese automakers, the Indian market is like the mandrake flower: alluring, yet potentially toxic. Whether they can overcome various obstacles and successfully capture the Indian market is a test of their wisdom. The "Wang Chuanfu's" time to shine has arrived.
