Tesla restarts India market talks with new factory proposal

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(Reuters) – Tesla Inc (TSLA.O) has proposed setting up a factory in India to build electric cars for domestic sale and export, the carmaker told government officials on Wednesday, according to a source with direct knowledge of the matter.

The proposal comes after India refused to agree to Tesla’s request last year to lower the import tax on cars, which can reach as much as 100%. India wanted the carmaker to build vehicles locally but Tesla wanted to test the market first with imports and the talks ended in deadlock.

While Tesla did not discuss lower import taxes with Indian officials, it proposed setting up a new factory, albeit without specifying a location or investment, said the source, who declined to be named as the talks were private.

Making cars locally aligns with Indian Prime Minister Narendra Modi’s pitch to attract companies with his “Make in India” campaign, especially as companies look to diversify their supply chains beyond China.

Senior Tesla executives are in India this week to meet the government to discuss local sourcing of parts and other issues, Reuters reported on Tuesday.

Tesla met officials from Modi’s office and other ministries on Wednesday, said the person and another source familiar with the matter.

Tesla did not respond to Reuters’ request for comment.

The electric carmaker’s renewed interest in India comes nearly a year after it put on hold plans to sell cars in the country after failing to secure lower import taxes, which its CEO Elon Musk said are among the highest in the world.

Tesla had hired a local team and began a search for showroom space, but that was also abandoned last year.

The meeting comes weeks ahead of Modi’s visit to the United States in June.

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