Despite numerous setbacks in the past, Tesla hasn’t given up on plans to enter the Indian market. Fortunately, the stalemate between Tesla and the Indian government may be about to end. 

The EV maker has reportedly proposed setting up a factory in the world’s most populous country for domestic sale and export. According to a source with direct knowledge of the matter cited by Reuters, the US company has communicated the proposal to Indian government officials on May 17.

Tesla’s proposal comes after India refused to agree to the company’s request in 2022 to lower the import tax on cars, which can reach as much as 100 percent. 

At the time, the south Asian country wanted Tesla to build the vehicles locally, while Tesla wanted to test the market first with imports. The talks ended in deadlock, but it appears that negotiations have now resumed.

The unnamed source said Tesla proposed setting up a new factory to Indian officials, although it did not specify a location or investment. Tesla did not discuss lower import taxes with the Indian government representatives, the insider added.

On May 16, Reuters reported that senior Tesla executives are in India this week to meet the government to discuss local sourcing of parts and other issues. Tesla representatives met officials from Indian Prime Minister Narendra Modi’s office and other ministries on May 17, said the insider and another source familiar with the matter.

The meeting comes weeks ahead of Modi’s visit to the United States scheduled in June. Building cars in India aligns with the prime minister’s pitch to attract foreign companies with his “Made in India” campaign, especially as car manufacturers are looking to reduce their dependence on China by diversifying their supply chains.

In 2021, India promised to offer Tesla lower manufacturing costs China, where Tesla builds the Model 3 sedan and Model Y crossover for the local market and for export to global markets.

India is the biggest car market that Tesla has yet to enter. However, EVs are yet to take the local sales charts by storm. Passenger EV sales in India last year exceeded 41,000 units, a tiny fraction of the market’s 3.8 million overall passenger vehicle sales.

Tesla had hired a local team in India in 2021 and also started searching for showroom space, but that was abandoned last year. Back in 2016 when pre-orders for the Model 3 started, Tesla began taking $1,000 refundable deposits from Indian customers. According to an April 2022 report from The Indian Express, some of the customers were still waiting for refunds.