Tesla has lost one of the key executives it hired to handle business in India after the company’s plan to enter the market stagnated due to a disagreement on import duties.
Manuj Khurana, Tesla’s Policy and Business Development executive in India, was appointed in March 2021 and played a crucial part in the company’s domestic market entry strategy. However, Khurana resigned after Tesla and the Indian government could not find common ground on terms that would have brought the electric automaker’s cars to the country. Reuters initially reported the story, citing people familiar with the matter.
For more than a year, Khurana worked with the Indian government to reduce the import tax on electric cars from as high as 100% to 40%, claiming that this would allow Tesla to test the market with imports from its manufacturing centers like China before investing in a factory. Tesla CEO Elon Musk repeatedly pushed for reduced import duties to test demand, but the Indian government would not budge. The government required Tesla to commit to building a manufacturing facility in the country before it would consider reducing import taxes. Tesla wouldn’t take the risk financially.
Tesla argues in a letter to India’s top think tank, Niti Aayog, that cutting imports of fully constructed electric cars to 40 percent would be more acceptable than the present 60 percent rate for automobiles under $40,000 and the 100 duty rate for cars over $40,000.
In July 2021, CEO Elon Musk stated on Twitter that he is likely to open a factory in India if it is successful with imported vehicles. It did not make financial sense for Tesla to commit to a factory worth potentially hundreds of millions of dollars without first testing vehicle demand.
Prime Minister Narendra Modi’s government wanted Tesla to commit to producing cars in India, as it has focused on revamping domestic manufacturing since funding billions to the Make In India campaign. Tesla put its plans to sell cars in India on hold, shifted some of its domestic staff, and abandoned its search for showroom space due to the standstill in negotiations.
Tesla had a deadline of February 1 to determine if its contributing efforts had yielded results. This is the day India releases its budget and reveals tax revisions.
Some members of Tesla’s small staff in India have been given extra tasks in other regions, the report states. Khurana has been working in a new “product” capacity in San Francisco since March, according to his LinkedIn profile.