Chinese electric vehicle (EV) maker BYD Auto Co plans to build a plant in Vietnam to produce car parts, according to a Reuters report quoting information from people with knowledge of the matter. This is a part of a global expansion that would reduce the company’s reliance on China and deepen its supply chain in Southeast Asia.

According to one of the sources, the investment in northern Vietnam would exceed $250 million, expanding parent company BYD Co’s presence in Vietnam, where its electronic unit manufactures solar panels.

The move reflects a broader trend among manufacturers to reduce their exposure to China in the face of trade tensions with the US and production disruptions caused by Beijing’s previous COVID-19 lockdowns.

There were no comments from BYD.  

The Xian-based automaker, which outsold rival Tesla Inc (TSLA.O) in EV sales in China by more than two to one last year, has been expanding in Asia, including Singapore and Japan, as well as Europe.

BYD, which is backed by Warren Buffett’s Berkshire Hathaway, manufactures both plug-in hybrids and all-electric vehicles. BYD, like Tesla, controls much of its supply chain, including battery production, which distinguishes it from established automakers.

In September, the company announced plans to build an EV assembly plant in Thailand with an annual capacity of 150,000 vehicles beginning in 2024.

BYD is investing in Vietnam in order to increase capacity, control costs, and diversify production away from its operations in China, where demand has been high.

According to the sources, who declined to be identified because the discussions are private, discussions are underway to select a location for the Vietnam plant. According to one source, construction would begin by mid-year.

It was unclear what components BYD would manufacture in Vietnam, or whether they would include batteries or battery packs.

BYD’s planned investment, along with a $400 million project by digital display maker BOE reported this week by Reuters, would amount to more than a quarter of the $2.5 billion in total Chinese investment in Vietnam last year.

US corporations such as Apple Inc., as well as their suppliers such as Taiwan’s Foxconn and China’s Luxshare, have been looking for alternative production hubs, with neighboring Vietnam being one of the main options.

According to a second source, BYD is looking to lease 80 hectares (200 acres) of industrial land, more than doubling its footprint in Vietnam, where its electronic unit currently rents 60 hectares.

According to one source, the Vietnam plant will export components to the Thailand assembly plant.

According to one source, the operation in Vietnam could also serve the local market, primarily through maintenance services and spare parts for BYD vehicles imported from China.

This would directly compete with VinFast, a Vietnamese EV manufacturer that began selling cars in 2019 and has plans to expand in the United States and Europe.

The US Commerce Department discovered in December that BYD and other Chinese companies were evading decade-old US tariffs on Chinese solar cells and panels.

If confirmed in May, this finding would subject those companies to duties on products manufactured in Vietnam and other Southeast Asian countries.

(Adapted from Reuters.com)