It’s the first significant Chinese auto investment in India since 2017. The colourfully named Horse Powertrain, a joint-venture backed by China’s Geely, will invest up to $370 million to manufacture hybrid powertrains in Chennai. After years of near-freeze, Chinese participation in India’s auto sector may finally be restarting.
For a very different China-India auto story, turn to the June 8 edition of China’s English-language Global Times. Days earlier, Tata Motors announced it would use Chinese automaker Chery’s platform for its premium Avinya EV, fuelling speculation the partnership could deepen. The state-run Global Times quickly shut that down. Chery stressed the agreement was limited to “vehicle-related parts supply, including providing auto components.” It denied any plans for direct investment or technology transfer in India.
The two announcements capture the changing dynamic in China-India economic ties. India is cautiously reopening to Chinese investment just as China is becoming more restrictive about technology transfers and overseas investment.
The turning point came in 2020. After the Galwan Valley clash, India effectively slammed the brakes on Chinese investment, requiring government approval for investments from neighbouring countries. Many proposals were delayed indefinitely or abandoned. Four years later, policymakers have concluded that sectors such as EVs, batteries and advanced manufacturing cannot become globally competitive without some access to Chinese technology and capital.
In March, India signalled a more pragmatic approach, allowing Chinese companies to take minority stakes in Indian firms in select sectors. The shift is modest but marks the first meaningful easing of restrictions since 2020.
Unfortunately for Indian companies, this policy change has come just as Beijing has tightened controls over its own companies, helping explain why Chery distanced itself from suggestions of deeper cooperation with Tata.
China’s tougher stance is not aimed primarily at India. It reflects Beijing’s response to growing US and other Western restrictions on Chinese investment and technology exports. China has introduced tighter controls on technology exports, outbound investment and sensitive industrial know-how, while strengthening supply chain rules to discourage manufacturers from relocating production overseas.
From Beijing’s perspective, India occupies an ambiguous position. On one hand, it’s not central to China’s global economic strategy. “They aren’t losing any sleep over it,” says Santosh Pai, partner at Dentons Link Legal.
Yet India is now the world’s third-largest automobile market and one of the fastest-growing EV markets. Companies like Chery would clearly like a foothold. Even so, Chinese policy is shaped by broader global strategy rather than India alone.
The auto sector isn’t unique. Across industries, Chinese and Indian companies are quietly exploring structures that can satisfy both countries’ regulators. “There’s been more activity in the last six months than in the last six years,” says Pai. Whether these proposals clear approval hurdles in New Delhi and Beijing remains uncertain.
Overplayed its hand?
Pai also believes Beijing risks tying its own companies in knots. “China may have overplayed its hand. They’ve put out legislation after legislation in the last three years to put every global Chinese company into shackles. Will it be overkill? At the end of five years, if none of the Chinese companies is going to be global, then it’s backfiring on them.”
The solar industry illustrates the same tensions. India has become one of the world’s largest solar markets, with companies like Adani building giant projects. But after India imposed higher duties and restrictions on Chinese solar imports, Chinese manufacturers shifted production to Southeast Asia rather than investing in India, allowing them to keep serving India while avoiding trade barriers.
India paid a price. Instead of attracting manufacturing investment, it continued importing large volumes of solar equipment. While the Adanis have since localised much of their production, key materials such as polysilicon, ingots and wafers are still imported. The automotive industry presents an even tougher challenge. Indian manufacturers still source a large share of critical parts from China, reflecting its dominance of EV supply chains. As one industry analyst puts it: “Chinese companies will be fighting with companies that are sourcing almost everything from China.”
That dependence should decline as domestic manufacturing expands, but keeping pace with China’s rapid technological advances remains difficult. Chinese firms continue to lead in batteries, software and vehicle platforms. BYD’s latest Blade Battery, for example, offers a range of over 1,000 kilometres and charging in minutes.
Despite political tensions and regulatory hurdles, many Chinese companies remain eager to enter India, seeing it as one of the biggest long-term growth markets across automobiles, renewable energy, electronics and advanced manufacturing.
The question is whether commercial logic will ultimately outweigh geopolitical caution. The coming months will test whether the two countries are willing to let business opportunities trump political differences.
Published on July 3, 2026