Tesla Inc has put plans to sell electric vehicles in India on hold, abandoned a search for showroom space, and transferred some of its domestic staff after failing to achieve reduced import duties, according to a report published by Reuters based on sources familiar with the matter.

The decision comes after more than a year of impasse with government authorities as Tesla sought to initially test demand by selling electric vehicles (EVs) imported from production hubs in the United States and China at cheaper tariffs.

However, the Indian government is pressuring Tesla to commit to local manufacture before lowering taxes, which can be as high as 100% on imported automobiles.

According to the story, Tesla set a deadline of Feb. 1, the day India reveals its budget and announces tax revisions, to see if their lobbying was successful.

When Prime Minister Narendra Modi’s government refused to make a compromise, Tesla halted plans to bring cars into India, according to the people, who requested anonymity because the discussions were private.

Tesla had been looking for real estate to open showrooms and service centres in the important Indian cities of New Delhi, Mumbai, and Bengaluru for months, according to two individuals.

There was no comment available from Tesla in the report.

Some of Tesla’s small crew in India has been given extra tasks for other markets. Manuj Khurana, its India policy executive, has taken on an additional “product” responsibility in San Francisco since March, according to his LinkedIn page.

In January, Tesla CEO Elon Musk stated that the company was “still working through a lot of problems with the government” in terms of sales in India.

However, increasing demand for Tesla vehicles in other markets, as well as a conflict over import duties, spurred the strategic adjustment, according to the sources.

Modi has tried to entice manufacturers with his “Make in India” push, but his transport minister, Nitin Gadkari, stated in April that Tesla importing cars from China would not be a “good proposal.”

However, New Delhi secured a victory in January when German luxury carmaker Mercedes-Benz announced that it would begin building one of its electric vehicles in India.

Tesla hoped to acquire an early lead in India’s modest but expanding electric vehicle market, which is now dominated by domestic automaker Tata Motors.

Tesla’s minimum price of $40,000 would place it in the luxury category of the Indian market, where sales account for only a tiny proportion of annual car sales of approximately 3 million. 

(Adapted from Reruters.com)