On Wednesday, March 1, Elon Musk confirmed reports that Tesla is indeed opening a Mexico EV plant to produce their next generation of electric vehicles. This marks the first time Tesla is investing in Mexico and yet another significant investment being made in Mexico’s EV manufacturing capability.
Mexico has made strides in the automotive industry in general, and specifically in the electric segment in recent years. Tesla’s new factory emphasizes Mexico’s readiness to meet rising US and global demand for EVs.
Leading electric vehicle manufacturer, Tesla, has announced that it plans to build a new factory in the industrial hub of Monterrey, Mexico. The move comes as a part of Tesla’s continued expansion efforts, as the company looks to bolster its presence outside of the United States. This announcement follows similar investments from other major car manufacturers such as BMW, Ford, and General Motors, who have all chosen to expand their operations in Mexico in recent years – particularly in EVs.
Mexico President Andres Manuel Lopez Obrador confirmed the news, stating that the plant would create “considerable investment and many, many jobs.” The location of the factory in Monterrey, is situated about three hours from Texas and was chosen due to its proximity to the United States, which is Tesla’s largest consumer market.
The new factory is expected to produce around one million vehicles per year, with an initial investment of $5 billion. It will be Tesla’s fifth overall factory and third factory outside of the US, following plants in China and Germany. The factory is expected to produce Tesla’s next generation of more affordable electric cars, but may expand to also manufacture trucks and sports car models.
The announcement of Tesla’s new factory comes at a time when electric vehicle sales are growing rapidly worldwide. Tesla is anticipating continued growth in the years ahead as drivers turn to greener modes of transport, and the company is looking to position itself as a leader in the market. What is expected to start as a $5 billion USD investment in Mexico could grow to a $10 billion investment, as Tesla expects to exceed their initial goal of one million cars per year at the plant.
In fact, while Tesla manufactured 1.37 EVs in 2022, the announcement was made to investors that this plant will be critical in reaching a new goal of 3.5 million units per year worldwide. Called a “gigafactory,” the Tesla Mexico plant will primarily focus on producing what the company is calling their “next-gen EV.” Details on the next-generation Tesla car have not been released.
The announcement of Tesla’s new factory in Mexico has been welcomed by many in the industry, with experts predicting that it will lead to increased competition and innovation in the electric vehicle market. The move also demonstrates Tesla’s continued commitment to sustainability and reducing carbon emissions, as the company looks to play a leading role in the transition to cleaner transportation.
Mexico has seen a significant increase in automotive manufacturing in recent years, as US automakers have looked to reduce costs by moving operations south of the border. Mexico has been positioning itself as a winner amidst the tensions between the US and China, which have disrupted traditional supply chains. As part of the United States-Mexico-Canada Agreement (USMCA), Mexico and Canada are exempt from the “made-in-America” rules for cars to qualify for new subsidies included in a massive spending plan approved to tackle climate change last year.
Tesla’s new factory in Mexico is a significant investment in the country’s automotive industry and a sign of the continued growth of the electric vehicle market. Mexico is already leading the rise of EV with extensive investments to expand capacity. The Mexican government:
Mexico’s EV industry is expected to grow 25% annually through 2030. And Mexico will likely become the largest EV producer in Latin America.
Tesla and Mexico are forming a relationship at a unique juncture for both entities. Tesla shares have been jumpy in recent years due to controversies surrounding CEO Elon Musk. Yet global performance remains strong, and incredible demand growth promises great potential. Globally, the EV market was estimated at $9.5 million USD in 2022, but this is expected to reach $80.7 million by 2030.
The investment climate in Mexico has also been closely watched by investors, as a test of the investment climate under Mr. Lopez Obrador, a left-wing populist, who was elected in 2018 on a platform not considered friendly to business. The move by Tesla, along with investments from other major automakers, is a vote of confidence in the Mexican economy and could encourage further investment in the country.
What remains to be seen is how well the two entities work together. Tesla has committed to meet the Monterrey region’s water scarcity issues by using all recycled water. And meetings between the leaders of Tesla and the Mexican government have been productive and amiable. Mexico has much to offer Tesla, from cheap labor to US proximity. And Tesla in turn may greatly exceed their $5 billion initial investment in the Mexican economy.
Currently, no timeline has been given for the completion of the new Tesla Mexico plant, but experts estimate the plant will open sometime in 2024.
