Tesla Inc has put plans to sell electric cars in India on hold, abandoned showroom searches and reassigned part of its domestic team after failing to secure lower import taxes, three people familiar with the matter told Reuters.
The decision ends more than a year of deadlocked talks with government officials as Tesla first attempted to test demand by selling electric vehicles (EVs) imported from manufacturing centers in the United States and China at lower tariffs.
But the Indian government is urging Tesla to commit to local manufacturing before it lowers tariffs, which can be as high as 100% on imported vehicles.
Tesla had given itself a deadline of February 1, the day India unveils its budget and announces tax changes, to see if its lobbying has yielded a result, the sources with knowledge of the company’s plan told Reuters .
When Prime Minister Narendra Modi’s government made no concession, Tesla put plans to import cars to India on hold, added the sources, who sought anonymity because the consultations were private.
For months, Tesla had been exploring real estate options to open showrooms and service centers in key Indian cities of New Delhi, Mumbai and Bengaluru, but that plan is now on hold, two of the sources said.
Tesla did not respond to an email asking for comment.
An Indian government spokesman did not immediately respond to a request for comment.
Tesla has given some of its small teams in India additional responsibilities for other markets. Manuj Khurana, head of India policy, has taken on an additional “product” role in San Francisco since March, his LinkedIn profile shows.
As recently as January, Chief Executive Elon Musk said Tesla was “still working on many challenges with the government” regarding sales in India.
But strong demand for Tesla’s vehicles elsewhere and the stalemate on import taxes prompted a shift in strategy, the sources said.
Mr Modi has tried to lure manufacturers with a “Make in India” campaign, but his transport minister, Nitin Gadkari, said in April it would not be a “good deal” for Tesla to import cars from China to India.
But New Delhi had clinched a victory in January when German luxury carmaker Mercedes-Benz announced it would start assembling one of its electric cars in India.
Tesla had been trying to gain an early advantage in India’s small but growing electric vehicle market, now dominated by domestic automaker Tata Motors.
Tesla’s price tag of at least $40,000 would place it in the luxury segment of the Indian market, where sales represent a tiny fraction of annual vehicle sales of around 3 million.