Explained: Why Chinese-Backed Auto Manufacturing Bids Stalled Over FDI

Chinese-backed auto manufacturing PLI applications stalled because pending FDI approvals delayed the process.

JSW MG Motor India, TACO Prestolite, and TACO Air International waited as India enforced strict scrutiny of Chinese investments after the 2020 Galwan clashes.

Now the government signals it will consider these existing applications once FDI nods arrive.

This shift affects only applications that already hold FDI clearance. No fresh window opens for new entries.

The change arrives as bilateral relations warm through ministerial talks, resumed flights and high-level meetings.

Why These Three Applications Stalled

Three specific ventures hit the bottleneck.

JSW MG Motor India:
This joint venture between JSW Group and China’s SAIC Motor sells MG-branded passenger vehicles in India.

Tata AutoComp Systems partnerships:

• TACO Prestolite works with Prestolite Electric Beijing. It designs and manufactures advanced electric drivetrains and traction motors for electric vehicles.
• TACO Air International works with Air International Shanghai. It produces automotive air-conditioning systems.

Pending Chinese FDI approvals delayed the PLI processing chain. Officials required prior government clearance for investments from land-border countries after the Galwan clashes. This rule created a clear sequence. Companies needed an FDI nod first, without it, PLI consideration could not begin.

The auto PLI scheme received approval in September 2021 with a Rs 25,938 crore outlay. It links incentives to incremental production, investment and domestic value addition. Applications that lacked the FDI step simply waited.

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Why Now: The Procedural and Diplomatic Shift

India and China improved relations after years of tension. Chinese President Xi Jinping visited India for the BRICS Summit and held a bilateral meeting with Prime Minister Narendra Modi. The two countries increased ministerial and official-level exchanges and agreed to resume direct flights.

India introduced new guidelines that expedite approvals for FDI proposals involving Chinese investments. A senior official confirmed the government will now consider existing PLI applications that already carry FDI approvals. Authorities will not open any new window for fresh applications under the scheme. This targeted approach unlocks the stalled files without expanding the applicant pool.

The Bigger PLI-Chinese FDI Pattern

Dixon Technologies provides the clearest sector-by-sector precedent. Its venture with a Chinese partner for electronic components already received PLI benefits. That approval in the electronics PLI scheme shows the same chain can clear once FDI clearance arrives. Auto manufacturing now follows the same path.

Key facts at a glance:

• Auto PLI scheme budget: Rs 25,938 crore
• Cumulative investment under the scheme: more than Rs 45,000 crore
• Expected payout this financial year: around Rs 4,000 crore
• FY 2026-27 budget allocation: Rs 5,939.87 crore (nearly triple the previous year’s Rs 2,091.26 crore)
• Only existing applications with FDI approval move forward

The pattern remains limited to cases that already cleared the FDI step. Electronics secured the first clearance under the PLI framework. Auto manufacturing now follows as the next sector in line.

The government therefore resolves the FDI-to-PLI bottleneck for the three named auto ventures without reopening the scheme. Improved bilateral ties and clearer procedural guidelines remove the earlier hold. Companies that already secured FDI clearance can now expect their PLI applications to advance.