Tesla puts India plan on hold after tax talks fail
NEW DELHI : Tesla Inc has put on hold plans to sell electric cars in India, abandoned a search for showroom space, and reassigned part of its domestic team after failing to secure lower import taxes, three people familiar with the matter said.
The decision caps more than a year of deadlocked talks with government representatives as Tesla sought to first test demand by selling electric vehicles (EVs) imported from production hubs in the US and China, at lower tariffs.
However, the Indian government is 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, according to the people with knowledge of the company’s plan.
When Prime Minister Narendra Modi’s government did not offer a concession, Tesla put on hold the plan to import cars into India, said the people, who sought anonymity because the deliberations were private.
For months, Tesla had scouted for real estate options to open showrooms and service centres in the key cities of New Delhi, Mumbai and Bengaluru but that plan is also now on hold, two of the people mentioned above said.
Tesla did not respond to an email seeking comment.
A government spokesman did not immediately respond to a request for comment.
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.
However, the strong demand for Tesla’s vehicles elsewhere and the standoff over import taxes prompted the shift in strategy, according to the people mentioned above.
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.
However, the government 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 the vehicle in the luxury segment of the Indian market, where this makes up just a tiny fraction of the annual vehicle sales of about 3 million.