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Tesla Inc asked how it could take part in domestic incentives in India related to car and battery manufacturing when it held discussions with government officials this week, a source with direct knowledge of the talks told Reuters.

The electric car maker proposed setting up a factory in India to build electric vehicles (EV) and also discussed plans to locally manufacture EV batteries, the person said.

The proposal comes after talks between Tesla and India were deadlocked last year over the car maker's request to lower the import tax on cars, which can reach as much as 100%. India wanted the car maker to build vehicles locally but Tesla wanted to test the market first with imports.

Tesla also discussed India's import taxes on cars but talks mainly centred around understanding the local policies and incentives to set up a new factory, said the source, who declined to be named as the talks were private.