US electric vehicle maker Tesla is welcome to set up shop in India, make cars there for sale and export them, but must not import cars from China, the transport minister said on Tuesday.
"Making in China and selling here is not a good proposition," the minister, Nitin Gadkari, said during a government conference.
Tesla is desperate to import and sell its electric vehicles in India, having lobbied officials in New Delhi for nearly a year to cut tariffs, which the company's billionaire chief executive Elon Musk says are among the highest in the world.
But its efforts are at stalemate as Tesla has not revealed a firm plan to invest in India, a step that would be in line with Prime Minister Narendra Modi's "Make in India" vision to boost local manufacturing and create jobs.
Tesla has been trying to import and sell its electric vehicles in India, but the government wants the car maker to manufacture locally. Earlier this year, it was reported that talks between Tesla and India have been stalled as the government isn't ready to reduce tariffs and import taxes. Tesla lobbied officials in New Delhi for nearly a year, without any headway. Indian officials were unconvinced by Tesla's lobbying. The government wants Tesla to locally manufacture its vehicles for sale and export. This would also boost local manufacturing and create thousands of new jobs.
The apparent deadlock could upset the electric carmaker's ambitions for the South Asian country as it was pinning hopes on lower import taxes to make its cars more affordable and the business viable. Currently, India levies an import tax of as high as 100 percent on electric vehicles which have a so-called landing cost - a car's price plus inbound shipping charges - of $40,000 (roughly Rs. 30 lakh) or more. This would make India the most expensive market for Tesla cars in the world, putting them well out of reach for most Indian consumers.