Tesla puts India entry plan on hold after deadlock on tariffs-sources

Tesla Inc has put on hold plans to sell electric cars in India, abandoned a search for showroom space and reassigned some of its domestic team after failing to secure lower import taxes, three people familiar with the matter told Reuters.

What seemed like a dream car to buy locally for many is to stay that way as Tesla has put all its India plans on hold after failing to secure lower import taxes. The US carmaker has ditched efforts to scout for showroom locations and even reassigned some of its Indian team, according to a report by Reuters. Tesla has been in talks with the Indian government for over a year as the carmaker wanted to understand the demand by selling fully-imported cars with at a lower tariff. Tesla The OEM wanted to import electric cars to India from its manufacturing hub in the US or China. However, the Indian government wanted Tesla to commit to making its cars in India the country before lowering taxes. The company Tesla was hoping to find some relaxations from the Union Budget announced on February 1looking at Feb 1 as a set date when the new Union Budget was announced, however, when with no tax concessions were in the cards, Tesla has put its India plans on hold. The US electric carmaker scouted for land to open dealerships and service centres in cities such as Delhi, Bangalore, and Mumbai before putting its plans on hold. The US carmaker wanted to take advantage of India's nascent EV market as an early EV entrant. brand, but since plans did not go well, this opened the market for other domestic carmakers such as Tata Motors to take the lead in this segment. When Tesla announced its plans in 2016, Indian customers were excited and a few made the booking amount of $1000 (Rs 77,340). However, six years on, what was supposed to be their dream car for them remains a dream. Since the carmaker announced the Model 3's plans, the company has sold over 3,00,000 Model 3s globally. For some Indian customers, the hassle is over, but for a few, the fight is still ongoing for a refund. Tesla had earlier received approval from the Indian Ministry of Road Transport and Highways (MoRTH) for a total of seven models to be launched in India, the Model 3 being one of them. Also, lLast year, the US electric carmaker had appointed Prashanth R Menon as its Director for Indian operations and its top management team consisted of names such as Manuj Khurana, Samir Jain, Nishanth, Chitra Thomas, Prasanth Menon, Nitika Chabbra, Sandeep Pannu, Nithin George Thomas, Vaibhav Taneja, Venkat Sreeram, and David Feinstein. Interestingly, Prashanth Menon, Vaibhav Taneja, and David Feinstein were associated with Tesla in the past in the company's US operations, while the others were external hires from companies such as Volvo, BMW, Porsche, Ather, and Reliance. However, after the announcement of its senior management team, Tesla has been quiet. Later, as per reports, Tesla had asked its India team to work on the larger Asia- Pacific markets as our the Indian government's stance on import duties could not be bargained didn’t attain the expected resultswith. There were also rReports that cited that most of Tesla's Indian employees moved to Dubai to look over the Middle-Eastern markets, while. Manoj Khurana, who was to overlook Policies and the Business Development for Tesla in India moved to the US to take up a product role.

Tesla Inc has put on hold plans to sell electric cars in India, abandoned a search for showroom space and reassigned some of its domestic team after failing to secure lower import taxes, three people familiar with the matter told Reuters.

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 United States and China, at lower tariffs.

But 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 Feb. 1, the day India unveils its budget and announces tax changes, to see if its lobbying brought a result, the sources with knowledge of the company’s plan told Reuters.

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 deliberations 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 sources said.

Tesla did not respond to an email seeking comment.An Indian 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.

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.

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