The Indian government has rejected Chinese automaker BYD Co’s proposal to set up a $1 billion factory in India in partnership with Hyderabad-based Megha Engineering and Infrastructure Ltd, reports The Economic Times.

As per reports, BYD had submitted a $1 billion investment proposal to build electric cars and batteries in India in partnership with a local company. India’s Department of Commerce, Department for Promotion of Industry and Internal Trade (DPIIT) had sought opinions from other departments on the investment proposal, the report said.

Under this collaboration, BYD was planning to assemble or manufacture 10,000-15,000 units of electric cars annually in India. The local company was putting up the capital while technology and know-how were to come from BYD, ET reported. It further claimed that security concerns around Chinese investments in India were flagged during the deliberations, which resulted in the rejection of BYD’s proposal.

In April 2020, India changed its Foreign Direct Investment policy, making government approval mandatory for investments coming from countries it shares borders with. The policy was intended to prevent Chinese companies from acquiring entities in India following the Covid-19 pandemic.

This is not the first time the Indian government has rejected a proposal for investment from a Chinese auto manufacturer. In 2022, China-based Great Wall Motors dropped its proposed $1 billion plant to enter the Indian market after waiting two and a half years for the government’s approval.

BYD has become the latest carmaker after Great Wall Motors, Changan, Haima and Chery to drop plans for an India foray, citing regulatory hurdles amidst increasing scrutiny of Chinese investments by the Indian government.