Aditi Sharma

NEW DELHI, Reuters – Tesla (NASDAQ) Inc put on hold plans for selling electric cars in India and abandoned a search to find showroom space. Three people who are familiar with the situation told Reuters that Tesla had reassigned some domestic employees after not being able to obtain lower import taxes.

This decision ends more than one year of stagnant talks between government officials. Tesla wanted to test the demand first by selling electric cars (EVs), imported from China and the United States at lower tariffs.

Tesla is being urged by the Indian government to make local production before it lowers tariffs. Imported vehicles can have up to 100% of these tariffs.

According to sources familiar with Tesla’s plans, Tesla set a Feb. 1 deadline for India to announce its budget and tax changes. This was in order to determine if lobbying had any effect.

Tesla stopped plans for Indian car imports after Prime Minister Narendra Modi’s government refused to offer concessions.

Tesla searched for properties in order to establish showrooms or service centres in New Delhi and Mumbai. But, that plan has now been put on hold according to two sources.

Tesla has not responded to an email requesting comment.

A spokesperson for the Indian government did not respond immediately to our request.

Tesla has given some additional responsibilities to its team in India for the other markets. His LinkedIn profile shows that Manuj Khurana, India policy executive at Tesla has assumed an additional product role in San Francisco as of March.

Elon Musk, Tesla Chief Executive had stated in January that he was still facing “a lot of problems with the government” regarding sales in India.

The strategy was changed because of the demand for Tesla vehicles in other countries and the imposition of import taxes, according to sources.

Modi tried to attract manufacturers through a campaign called “Make in India”, but Nitin Gadkari (transport minister) said in April that it was not a good proposition for Tesla to export cars to India from China.

New Delhi won the January contest when Mercedes-Benz, a German luxury carmaker, announced it would begin assembly in India of one its electric vehicles.

Tesla was looking to get an advantage in India’s growing electric vehicle market. Now, domestic automaker is dominant Tata Motors (NYSE:).

Tesla’s $40,000 minimum price would make it a luxury product in India. Only 1% of Indian car sales are made annually.