Aditi Shah, Aditya Kalra

NEW DELHI (Reuters) – India and Tesla (NASDAQ) Inc are still at loggerheads over tax benefits. The government has not agreed to allow the company any exemptions without a promise to make local products, according to sources familiar with the negotiations.

Tesla wants to sell and import its electric cars in India. For nearly one year, Tesla has lobbied New Delhi officials to lower tariffs. Elon Musk, the billionaire CEO of the company claims that India’s tariffs are some of the most expensive in the world.

Official sources in India said that they were not convinced by Tesla’s lobbying because the company had yet to share any plan for investing in India. This would have been in keeping with Prime Minister NarendraModi’s vision of “Make in India”, which aims to increase local manufacturing and create new jobs.

An unnamed third party with knowledge about Tesla’s thoughts said that talks have ended with the Indian government in an “unusual stalemate”.

The person stated that “Things aren’t moving forward (for Tesla)”.

As the talks are confidential, they declined to give their names.

This apparent blockade could be a setback for electric carmaker’s plans in South Asia. The company was counting on lower import tax to keep its vehicles more affordable and make the business profitable.

India currently imposes an import duty of up to 100% on electric cars that have a “landing cost” — the car’s price and inbound shipping costs — above $40,000

India will be the highest-priced market for Tesla vehicles in the world and would put them far beyond reach of most Indian buyers.

According to the third source, Tesla told officials that it was open to purchasing more components locally. However, government sources indicated that they are looking for firm commitments.

According to a senior Indian government official who said the cut in import duties was unlikely anytime soon, “If they don’t want to spend anything here, then how is that model going?

Tesla has not responded to my request for comments.

Modi’s Office and India’s Ministries of Finance and Industries, who are each reviewing Tesla’s requests, didn’t respond to our request for comment.

HARDLINE APPROACH

Tesla however has placed its hopes upon the February 1, federal budget – which is usually when these tax changes are announced – in order to wait and see if it’s lobbying pays off, or to rethink how the company wants to address the Indian market.

The fourth source claimed that Tesla had met with officials of India’s customs and tax department in its most recent push. It has previously met Modi’s office https://reut.rs/3GLpudL and sought a meeting for Musk with the prime minister to discuss its plans for India.

Modi’s government, which aims to boost local production, has historically taken a tough stance against requests from foreign corporations. Modi rejected many of Apple’s demands for tax concessions in 2017, including lower import duties.

Musk stated previously on Twitter (NYSE.) that Tesla may consider building cars here if India succeeds in selling its imported vehicles. He tweeted last week https://reut.rs/33pXP3H the company was “still working through a lot of challenges with the government.”