Tesla has shelved plans to sell its electric vehicles (EVs) in India and scrapped a search for showroom space following multiple deliberations with the Indian government for lower import tariffs, three people aware of the discussions said.
The EV maker has for more than a year negotiated with government representatives to allow it to gauge demand by rolling out EVs shipped from its production hubs in the US and China at lower tariffs.
But India has been pushing Tesla to commit to manufacturing locally before it will lower tariffs, which can run as high as 100% on imported vehicles.
Tesla had set itself a deadline of February 1, the day India unveils its budget and announces tax changes, to see if its lobbying brought a result, the people aware of the company’s plan said.
When Prime Minister Narendra Modi’s government did not offer a concession, Tesla put on hold the plans to import cars into India, added the sources, who sought anonymity because the talks were private.
For months, Tesla had scouted for real estate options to open showrooms and service centres in the key Indian cities of New Delhi, Mumbai and Bengaluru, but that plan is also now on hold, two of the people said.
Tesla did not respond to an email seeking comment.
An Indian government spokesman did not immediately respond to a request for comment.
Standoff Over Taxes Behind Shift in Strategy
Tesla has assigned additional responsibilities for other markets to some of its small team in India. Its India policy executive Manuj Khurana has taken on an additional “product” role in San Francisco since March, his LinkedIn profile shows.
As recently as January, Chief Executive Elon Musk had said Tesla was “still working through a lot of challenges with the government” in regard to sales in India.
But the strong demand for Tesla’s vehicles elsewhere and the standoff over import taxes prompted the shift in strategy, the sources said.
Modi has sought to lure manufacturers with a “Make in India” campaign, but his transport minister, Nitin Gadkari, said in April it would not be a “good proposition” for Tesla to import cars from China to India.
But New Delhi had clinched a win in January, when German luxury carmaker Mercedes-Benz said it would start assembling one of its electric cars in India.
Tesla had looked to gain an early advantage in India’s small but growing market for electric vehicles, now dominated by domestic automaker Tata Motors.
Tesla’s price tag of $40,000 at minimum would put it in the luxury segment of the Indian market, where sales make up just a tiny fraction of annual vehicle sales of about 3 million.
- Reuters with additional editing by Jim Pollard