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Tesla Abandons a Golden Opportunity

Tesla is reportedly putting its plans to sell cars in India on hold after failing to secure lower import taxes.
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It looks like Elon Musk won't be doing his dance routine in India.

The Tesla  (TSLA) - Get Tesla Inc. Report CEO is known for busting a move whenever he attends the opening of a new factory, but he reportedly won't be slipping on his boogie shoes in India anytime soon.

'A Lot of Challenges'

The electric auto maker has put its plans to sell cars in India on hold, abandoned a search for showroom space and reassigned some of its domestic team after failing to secure lower import taxes, Reuters reported, citing anonymous sources.

The company did not respond to a request for comment.

Tesla had sought to test demand by selling EVs imported from the US and China at lower tariffs, but government officials had pressed for the company to commit to manufacturing locally before it would lower tariffs, which can run as high as 100% on imported vehicles.

Musk had said Tesla In January was "still working through a lot of challenges with the government" in regard to sales in India.

Tesla incorporated an Indian company in Bengaluru, the capital of India’s southern Karnataka state, in 2021, with the government stating that "the U.S. firm Tesla will be opening an electric car manufacturing unit in Karnataka.”

Last month, India's transport minister Nitin Gadkari said Tesla is still welcome to build a factory, but it doesn’t want Tesla to import vehicles from China, saying that "making in China and selling here is not a good proposition."

However, the strong demand for Tesla's vehicles elsewhere and the standoff over import taxes prompted the shift in strategy.

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India is the fourth largest automotive market in the world and is expected to see the strongest growth in 2022, Moody's Investor Service said last month.

Electric vehicles in 2021 jumped 168% from the prior year, according to EVreporter, but still make up a small portion of the overall market. 

'A Blessing for Indian Auto Industries'

The electric two-wheel and three-wheel segment continue to drive EV volumes in the country.

Climate change is playing a role in the country's desire to move to electric vehicles. India ranked 178th out of 180 countries in a 2018 air quality index (EPI). 

The county has set a goal of 100% electrification by 2030, according to a McKinsey & Company report.

India’s electric vehicle industry is still in its infancy and there are more than 10 major players in the two-wheeler field, 3-4 major players in electric buses, and some in cars.

Tata Motors is the largest electric vehicle maker in India and one person on Twitter said that "Tesla not coming to India will be a blessing for Indian Auto Industries. Mark mytweet @anandmahindra @vijaynakra or @TataMotors will definitely come out with a model like Tesla."

"Real reason Tesla is leaving india before it even started any actual operations here is not due to the heavy import charges but due to the Govt forcing them to tie up with one of the many conglomerate monopolies here," another person tweeted.

Another commenter held out up for a Tesla presence in India, tweeting "Elon is a good bargainer - evident from Nevada factory. It might be later, but not never. Can’t ignore."

"Tesla wants to make its stuff cheap in China, and sell it to India," another poster said. "Nice try! No selling in India unless you manufacture there. This makes room for Indian auto manufacturers and companies like Toyota, Nissan, Honda, Volkswagen. GM and Ford will have the same problems as Tesla."