Tesla has reportedly set itself a deadline of February 1, 2022, the day India unveils its budget and announces tax reforms, to see if its lobbying bears fruit.

Tesla Inc has suspended plans to sell electric vehicles in India, abandoned the search for showroom space and reassigned some of its domestic team after failing to reduce import duties, three people familiar with the matter told Reuters.

The decision ends more than a year of stalled talks with government representatives as Tesla tries to test demand first by selling electric vehicles (EVs) imported from production centers in the U.S. and China with lower tariffs.

But the Indian government is pushing Tesla to commit to local manufacturing before lowering the tariffs, which could be as high as 100 percent on imported cars.

Tesla has set itself a Feb. 1 deadline, the day India unveils its budget and announces tax reform, to see whether its lobbying brings result.

Tesla has suspended plans to import cars to India due to the lack of concessions from Prime Minister Narendra Modi’s government, the sources added, asking not to be identified because the deliberations are private.

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Tesla has been looking for real estate options to open showrooms and service centers in major Indian cities New Delhi, Mumbai and Bangalore for months, but that plan has now also been put on hold, two sources said.

Tesla did not respond to emails seeking comment.

A spokesman for the Indian government did not immediately respond to a request for comment.

Tesla has assigned additional responsibilities in other markets to some of its smaller teams in India. His LinkedIn profile shows that since March, its India policy executive, Manuj Khurana, has held an additional “product” role in San Francisco.

As recently as January, CEO Elon Musk said Tesla was “still working through many challenges with the government” in terms of sales in India.

But strong demand for Tesla vehicles elsewhere and an impasse over import taxes prompted a shift in strategy, the sources said.

Modi has tried to lure manufacturers with a “Make in India” campaign, but his transport minister Nitin Gadkari said in April that Tesla’s import of cars from China to India was not a “good proposition” “.

But New Delhi won in January, when German luxury carmaker Mercedes-Benz said it would start assembling one of its electric vehicles in India.

Tesla has set a deadline of Feb. 1, the day the new budget is announced, to see if any of its lobbying bears out.

Tesla hopes to gain an early advantage in India’s small but growing electric vehicle market, which is currently dominated by domestic automaker Tata Motors.

Tesla’s minimum $40,000 price tag would put it in the luxury segment of the Indian market, which accounts for only a fraction of the roughly 3 million vehicles sold annually.

(Reporting by Aditi Shah; Additional reporting by Aditya Kalra; Editing by Kevin Krolicki and Clarence Fernandez)

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