For years, Tesla CEO Elon Musk and Prime Minister Narendra Modi’s administration have been in negotiations, but conflicts over a local plant and the country’s high import tariffs of up to 100% have resulted in a stalemate.

Tesla has been requested by the government to increase local procurement and provide precise production plans, while Musk has wanted lower taxes so that Tesla may begin selling imported vehicles at a lower price in a budget-conscious market.

The Indian automotive industry is still price sensitive to a great extent, and at a time when Tesla is trying to play the volume game, even its most cheap model, the Model 3, may not find widespread appeal if taxed at current rates. Then there’s the intriguing matter of how Tesla intends to get its cars into India. Union Minister Nitin Gadkari revealed last year that he had ordered Tesla to stop selling models built in China in India.

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The Shanghai facility, Tesla’s first outside of the United States, serves as a crucial center for not just local Chinese demand but also multiple worldwide markets. An Indian minister announced in October that he had ordered Tesla to stop selling cars built in China in India and instead build, sell, and export automobiles from a local manufacturer.

With a population equivalent to China, India is a potentially attractive market for electric vehicle manufacturers, but the country’s roads are still dominated by inexpensive, no-frills vehicles built by Suzuki Motor Corp. and Hyundai Motor Co.’s local businesses. Meanwhile, Tesla set yet another delivery record in 2021, shipping almost a million cars – 936,000 to be exact.

The Chinese market accounted for half of these, but the United States and a few European nations remain critical to Tesla’s success.