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Tesla explores manufacturing options in India after government meeting

Tesla reconsiders manufacturing plans in India after meeting government officials.

Tesla, the U.S. electric vehicle maker, is revisiting its plans to manufacture its vehicles in India, according to a report by CNBC-TV18 on Wednesday. The report cited sources who said that Tesla officials met with Indian government representatives in New Delhi and conveyed their concerns on taxation and duties in India.

Tesla has been eyeing the Indian market for a long time, but has faced challenges in securing lower import tariffs for its cars. The Indian government has been pushing Tesla to commit to local production before it will lower the 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, Reuters reported earlier this month. However, when the government did not offer any concession, Tesla put on hold its plans to import cars into India and abandoned a search for showroom space, Reuters said.

Tesla’s chief executive Elon Musk had said in January that the company 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, Reuters sources said.

India’s car market is dominated by low-cost, mainly small cars made by Japan’s Suzuki Motor Corp. Its Maruti Suzuki brand accounts for seven of the top 10 sellers with South Korea’s Hyundai Motor Co. being the second-biggest player.

India has been promoting electric vehicles as part of its efforts to reduce carbon emissions and dependence on fossil fuels. However, the adoption of EVs has been slow due to high costs, lack of charging infrastructure and consumer preferences.

Tesla’s reconsideration of its manufacturing plans in India could be a setback for the country’s ambitions to become a global hub for EVs. The government has offered various incentives and subsidies to attract EV makers and buyers, but has also faced criticism for not lowering import duties on EVs.

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