Elon Musk Plan of a Gigafactory in Mexico
Tesla boss Elon Musk unveiled a model of the upcoming new plant. It will take place in Mexico, close to Monterrey. And I’d want to highlight that we will keep expanding production in all of our existing plants “he said. “The Gigafactory project in Mexico will be complimentary to the output of other parties,” claimed the businessman.
According to Martha Delgado, Undersecretary for Multilateral Affairs at the Foreign Ministry, the investment would be around US$5,000 million. Moreover, it will create up to 6,000 jobs. The factory will be built on the outskirts of Monterrey, in the state of Nuevo León.
Tesla’s arrival complements BMW’s commitment to invest US$860 million in the production of electric vehicles at its factory in San Luis de Potos, as well as declarations by other industry titans regarding new operations to grow or start their electricity production. So, Tesla and BMW join the eight existing electric car plants in the country. This is including global automotive industry titans such as General Motors and Ford. Almost four years ago, the electric vehicle sector began its engines in Mexico. The country has created a strong automotive industry for decades. Therfore, it becomes the world’s seventh producer and fifth exporter.
Furthermore, forecasts show that electric vehicle production (which was 9,000 units in 2022) will approach 40,000 units in 2025. However, this is not counting the cars that Tesla will manufacture.
What Are The Advantages For Elon Musk in Mexico?
- Strategic Location: One of the first advantages is the proximity to the United States, the world’s second largest automobile market. The large corporations construct their vehicles on the Mexican side, and the majority of them are sold in the US market. These are “Made in Mexico” vehicles that cross the border in a matter of hours and arrive at their destination.
- Mexico has the human talent: Mexico has a skilled labor force that has spent years learning how to manufacture all of the pieces needed to build an automobile. Those decades of expansion have caused the automobile industry to construct infrastructure, such as roads to transport cars to the US market and a logistics network to transfer the industry.
- Mexico has an extensive auto part industry: Many multinational companies feed to manufacture their products in Mexico. One of the things that has benefited the Mexican automotive industry the most is the signing of the T-MEC, the free trade agreement between Canada, the United States and Mexico. Under this trade agreement, vehicles produced in Mexico (containing at least 75% manufacturing with local components) do not pay the 25% tariff that cars from other countries must pay.
The Challenge of Electricity
Nevertheless, for Mexico’s electric vehicle industry to thrive, the country must address a major issue: Electricity.
The production of electric vehicles necessitates the use of significant amounts of electricity, a resource that enterprises do not have guaranteed access to. Big firms from various industries that want to relocate some of their manufacturing operations to Mexico have run across the issue of shortage of this type of energy, which has been on the table for a long time and is still a sticking point.
Conclusion
Tesla’s plans are a great opportunity for Mexico. It increases the importance of Mexico in the automotive industry. Moreover, it creates many new jobs. Nevertheless, there are some challenges like the electricity problem. However, Tesla’s ambitious plan shows that Mexico is becoming more and more economically interesting for investors.
