India Keeps China’s BYD at Red Signal, Shifts Gears to Court Elon Musk’s Tesla

India appears to be drawing a clear line when it comes to foreign investments in its growing electric vehicle (EV) sector. While Chinese auto giant BYD faces hurdles, the Indian government is shifting gears to woo American EV pioneer Elon Musk and his company Tesla.

Union Trade Minister Piyush Goyal recently confirmed that market access to BYD will remain restricted. This move reflects India’s broader strategy to be selective in allowing foreign players into sensitive sectors like electric mobility, where both geopolitical and economic interests are at play.

Why Is India Holding Back BYD?

The Indian government remains cautious about Chinese companies due to opaque ownership structures and their ties to the Communist regime and military. This concern is not new — it has been intensifying over recent years as India reassesses its economic relationships in the backdrop of border tensions and security considerations.

There’s also growing discomfort over China’s non-market economy practices, such as heavy subsidies and loan write-offs that give Chinese firms an unfair competitive edge. These policies raise red flags among Indian officials, especially in sectors like manufacturing and EVs, where fair competition is crucial.

One example of this cautious stance was when India blocked a proposed $1 billion joint venture between BYD and Megha Engineering — the latter later got embroiled in the electoral bonds controversy, adding more complexity to the deal.

Press Note 3 Still in Force

India’s strategy isn’t just based on sentiment — it’s backed by regulation. Investment checks introduced through Press Note 3 continue to guide how foreign investments are handled, especially those from countries sharing land borders with India.

Under Press Note 3, all such investments require prior government approval, giving authorities discretion in assessing risks. It has become a key filter for national interest, ensuring that strategic sectors like electric vehicles aren’t opened up to companies that raise security or market fairness concerns.

A Clear Preference: Tesla Over BYD?

At the same time, India is making efforts to attract Tesla and Elon Musk, whose company represents not just a business opportunity but also a symbol of cutting-edge technology and innovation. Courting Tesla is seen as a move aligned with India’s vision for clean energy, advanced manufacturing, and global partnerships.

This dual approach — caution toward Chinese investments and openness toward strategic Western partnerships — underscores India’s evolving investment policy.

By keeping BYD at a red signal while laying out the welcome mat for Tesla, India is making its priorities clear: it wants foreign investments that align with its long-term economic and security interests, without compromising competitive fairness.