The decision brings to an end more than a year of stalled talks between Tesla and representatives from the Indian government. The reason is that Tesla wants to first test demand in the Indian market by selling electric cars imported from the US and China with lower tariffs. The Indian government wants Tesla to first commit to making cars locally before lowering the tariffs.
To sell imported cars, Tesla has been calling on the Indian government to reduce import duties. Currently, India’s electric vehicle import tax is 60% for cars priced below $40,000 and 100% for cars priced above $40,000. According to information on Tesla’s US website, the company only has one model that sells for less than $40,000. This would make India the most expensive market for Tesla cars in the world, making it unaffordable for most Indian consumers.
Tesla has set itself a Feb. 1 deadline, the day India unveils its budget and announces tax reforms, to see if its lobbying bears fruit, the people said. But in the end, when the Indian government didn’t budge, Tesla shelved plans to import cars to India.
In recent months, Tesla has been looking for showrooms in major cities in India, including New Delhi, Mumbai and Bengaluru, the people said. But now, that plan has been shelved.
Tesla and the Indian government have yet to comment.
In February last year, Tesla registered a company in India, taking a step towards entering the Indian market. It was expected at the time that Tesla could enter the Indian market as soon as mid-2021.
It was reported in February that Tesla would have to commit to the Indian government to purchase at least $500 million in auto parts from India in order to reduce the import tax on electric vehicles.