Mahindra and Mahindra (M&M), India’s only electric carmaker, is readying plans to enter China’s hyper-competitive electric car market.

The SUV Major, promoted by billionaire Anand Mahindra, has narrowed down on 20 companies that have significant technology in the electric mobility space, said a source working on the project.

One of these companies, the one that’s finally shortlisted, will form a joint venture with Mahindra Electric Mobility (renamed from Mahindra Reva Electric) to sell electric vehicles in China. Chinese regulations disallow M&M (or any international company) to start local manufacturing without a local partner.

“If you do not manufacture in China, it would attract 25% import duty, which will make the products anti-competitive,” said the source, who didn’t want to go on record. To put things in perspective, China is the world’s largest automobile industry, with a strong focus on making electric vehicles mainstream.

China sold 3,52,000 new electric vehicles in 2016, contributing to 46% of global registrations, leaving the US, which registered 1,52,000 vehicles, far behind. China also produces 43% of the world’s electric vehicles.

“China is pouring money (in the form of subsidies) into every bus and every car. India does not have that kind of money,” said Chetan Maini, vice chairman of SUN Mobility, which is making swappable batteries for electric cars. Maini’s Reva Electric Car Co. (later acquired by M&M to form Mahindra Reva Electric) developed India’s first electric car, Reva, in 2001.

M&M has been eying the China market for quite some time. In October, Arvind Mathew, then the CEO of Mahindra Reva electric, had told Bloomberg that M&M has been continuously looking at the Chinese market for scale.

China is the hotbed for anything electronic or electric, and cars are no different. Throw in volumes, and the production cost is lower than in other countries.

The company remains tight-lipped about its China plans. “We believe that the Indian electric vehicle market is poised for a take off and given that scenario, we will now be primarily focussing on the Indian market. We will keep you updated about China at an opportune time,” said a company spokesperson.

India’s contribution to global sales and manufacturing for electric vehicles is insignificant. In 2016, Indian electric vehicles’ sales grew by 37.5% to 22,000 units, but only 2,000 of that were four-wheelers. China’s huge base offers a substantial opportunity for Mahindra Electric.

However, it will not be an easy journey for Mahindra in China. “The Chinese carmakers are already ahead in electric vehicle technology. They are also ahead of Mahindra in total volumes,” said London-based consultant Deepesh Rathore, co-founder of Emerging Markets Automotive Advisors.

The gap between India and China is here to stay. According to a report by the International Energy Agency, China, which sold 3,12,300 electric vehicles in 2015, is expected to sell 4.6 million by 2020. India on the other hand is expected to sell 3,00,000 units by 2020.

Meanwhile, Mahindra wants to build a portfolio of electric cars — one for each car model under the M&M brand. The company is also working on building a Tesla-like luxury electric car under the Pininfarina brand, the Italian design and engineering studio that Mahindra acquired.

As M&M grows its base in electric vehicles, China can come in as an testing and learning ground, said Rathore. After all, M&M vehicles will be pitted against cars, bikes, SUVs and three-wheelers against a couple of hundred manufacturers.

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