on hold following a deadlock over tariffs
NEW DELHI — Tesla has placed on hold plans for selling electric cars in India and abandoned a search to find showroom space. Three people familiar with the matter said that Tesla reassigned some domestic employees after not being able to obtain lower import taxes.
This decision ends more than a decade of deadlocked negotiations with government officials. Tesla wanted to test demand first by selling electric cars (EVs), imported from production hubs in China and the United States at lower tariffs.
Tesla is being urged by the Indian government to make local production before it lowers tariffs. Imported vehicles can have up to 100% of these tariffs.
According to sources familiar with Tesla’s plans, Tesla had given itself a Feb. 1 deadline, when India will unveil its budget and announce tax changes. This was in order to determine if lobbying has led to any results.
Tesla stopped plans to import cars into India after Prime Minister Narendra Modi’s government refused to make concessions, according sources who requested anonymity because they were private.
Tesla had been looking for property options in India to open showrooms and service centres in key Indian cities like New Delhi, Mumbai, and Bengaluru for months. However, the plan has now been put on hold by two sources.
Tesla did not reply to my email asking for comment.
A spokesperson for the Indian government did not respond immediately to a request to comment.
Some members of the small Indian team have been given additional responsibility for markets outside India by Tesla. His LinkedIn profile shows that Manuj Khurana, India policy executive, has assumed an additional “product” role at San Francisco since March.
Elon Musk, Tesla’s Chief Executive, stated that Tesla is still working through “a lot of problems with the government” regarding sales in India as recently as January.
Sources said that the strategy change was prompted by strong demand elsewhere for Tesla’s cars and the impasse over import taxes.
Modi tried to attract manufacturers through a “Make in India” campaign. However, his transport minister Nitin Gadkari stated in April that it was not a good proposition for Tesla to import cars directly from China to India.
However, New Delhi had won a victory in January when Mercedes-Benz, a German luxury carmaker, announced that it would begin assembling an electric car in India.
Tesla had hoped to gain an advantage in India’s growing electric vehicle market. Now, Tata Motors is the dominant domestic automaker.
Tesla’s minimum price of $40,000 would place it in the luxury segment. This is where only a small fraction of India’s annual vehicle sales of approximately 3 million.
(Reporting by Aditi Sha; Additional reporting by Aditya Kakra; Editing done by Kevin Krolicki, Clarence Fernandez).