Tesla Inc. has suspended plans to sell electric vehicles in India, abandoned search for showroom space and re-hired some of its domestic team after failing to secure lower import taxes, three people familiar with the matter told Reuters.
The decision limits more than a year of stalled talks with government officials as Tesla seeks to test demand first by selling electric vehicles (EVs) imported from manufacturing plants in the United States and China at lower tariffs.
But the Indian government is pressuring Tesla to commit to local production before cutting tariffs, which could run up to 100% on imported vehicles.
Tesla has set a February 1 deadline for India to unveil its budget and announce tax changes to see if its lobbying results, sources with knowledge of the company’s plans told Reuters.
When Prime Minister Narendra Modi’s government made no concessions, Tesla suspended plans to import cars to India, sources said, adding that those who tried to remain anonymous because the talks were private.
For months, Tesla has been looking for real estate options to open showrooms and service centers in India’s major cities of New Delhi, Mumbai and Bangalore, but that plan is now stuck, two sources said.
Tesla did not respond to an email seeking comment.
An Indian government spokesman did not immediately respond to a request for comment.
Tesla has assigned some of its smaller teams in India additional responsibilities for other markets. Its India Policy Executive Manuj Khurana has been in an additional “product” role in San Francisco since March, according to his LinkedIn profile.
As recently as January, CEO Elon Musk said that Tesla was “still working with the government through many challenges” regarding sales in India.
Elsewhere, Tesla’s strong demand for cars and stagnation on import taxes prompted a change in strategy, sources said.
Modi has tried to woo manufacturers through the “Make in India” campaign, but his transport minister Nitin Gadkari said in April that importing cars from China to India would not be a “good offer” for Tesla.
But New Delhi won a landslide victory in January, when German luxury carmaker Mercedes-Benz said it would begin assembling one of its electric cars in India.
Tesla wanted to gain an early advantage in India’s small but growing electric vehicle market, which is now dominated by domestic automaker Tata Motors.
Tesla’s minimum ট্যাগ 40,000 price tag will place it in the luxury segment of the Indian market, where sales make up only a small fraction of the nearly 3 million annual car sales.