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China's BYD Co has submitted a $1 billion investment proposal to build electric cars and batteries in India in partnership with a local company, three people with direct knowledge of the plan told Reuters.

BYD and privately held Hyderabad-based Megha Engineering and Infrastructures have submitted a proposal to Indian regulators to form an EV joint venture, the people said, asking not to be named because the application is private.

The longer-term plan is to build a full line-up of BYD-brand electric cars in India from hatchbacks to luxury models, one of the three people said.

BYD, the world's largest producer of EVs and plug-in hybrid vehicles, did not immediately respond to a request for comment. The company previously said it planned to set up manufacturing in India, now the world's third-largest car market.

India's commerce and heavy industries ministries did not immediately reply to a request for comment.

BYD's push into India is part of its rapid global expansion to challenge Tesla, which still leads in sales of EVs alone. If the India investment is approved, it would give BYD a presence in all major global car markets with the exception of the United States.

Tesla has recently restarted talks with India's government after putting on hold plans to enter the market last year when it failed to secure lower tax duties on imported vehicles in talks with officials.

BYD has already invested $200 million in India where it sells the Atto 3 electric SUV and the e6 EV to corporate fleets, and plans to launch its Seal luxury electric sedan this year.

The total production capacity proposed by BYD was not immediately clear.

The maker of Blade batteries as well as finished EVs has plans to scale up to production of 100,000 EVs annually in India over a few years but would likely begin by shipping vehicles in parts for assembly in the country as it works to build up a supply chain, one of the sources said.

The investment proposal also includes a plan by BYD and Megha Engineering to set up charging stations in India and build research and development and training centres, the sources said.

The joint proposal comes amid stricter investment rules. Since 2020, India has tightened scrutiny of investments from neighbouring countries, including China.

Those controls forced China's Great Wall Motor to shelve a plan to invest $1 billion in the Indian market and pushed Chinese state-owned automaker SAIC's MG Motor unit to look for a local partner.

Shenzhen-based BYD entered the Indian market in 2007 producing batteries and components for mobile phone makers.

In 2013 it started building electric buses with Megha Engineering, under a joint venture company called Olectra Greentech.

BYD, which stands for Build Your Dreams, sold a total of 1.86 million BEVs and plug-in hybrids in 2022. In India, EVs made up just over 1% of total car sales of 3.8 million in 2022 but the government wants to grow this to 30% by 2030.

In India, BYD will compete with domestic automaker Tata Motors and Chinese rival MG Motor that currently dominate electric car sales.