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Tesla may announce as early as Friday plans to add a new factory near Monterrey, Mexico, according to reports from local newspaper Reforma.
The factory — expected to cost between $800 million and $1 billion — initially would produce parts for Tesla’s growing network of assembly plants. But it could later have vehicle production added, as well, according to various sources.
There have been numerous reports of discussions between Tesla CEO Elon Musk and Mexican officials in recent months, with one report indicating Tesla has even negotiated to have a special lane set up at the border crossing to speed up access to its planned factory.
Aggressive expansion plans
With global EV sales expected to grow rapidly, Tesla has laid out aggressive expansion plans. It expects to sell as many as 20 million vehicles annually by the end of the decade — which would give it a more than 20% share of the total global automotive market. Currently, it is running at less than a 1% share.
To get there the Texas-based automaker would need to vastly expand its current manufacturing network which now consists of Gigafactory assembly plants in Fremont, California; Shanghai, China; Berlin, Germany and Austin, Texas. It also operates a Gigafactory battery plant in Reno, Nevada.
On average, those facilities are geared to produce more than the typical automotive assembly plant, at 500,000 vehicles or more annually at full capacity. That means Tesla could require a dozen, possibly dozens of, new Gigafactories to achieve its sales goals for 2030.
Longstanding rumors
It’s been rumored for months that Tesla has been looking at potential operations in Mexico — a country where most of the world’s major automakers now run plants. The country offers a number of advantages, including low labor costs and close proximity to the U.S. market. Mexico also has more free trade agreements than any other country but Israel.
Tesla has narrowed its search down to three states, Mexican Foreign Minister Marcelo Ebrard said earlier this month. But it now appears a deal has been reached that would lock down a site near Monterrey, in the northern state of Nuevo Leon, various sources have indicated. Reuters noted Musk met in October with the state’s Governor Samuel Garcia, as well as Ken Salazar, the U.S. ambassador to Mexico, to firm up plans.
The initial plan calls for an investment of between $800 million and $1 billion, Reforma reported. But it cited sources indicating the eventual expansion of the facility would bring that to as much as $10 billion. While initial production would be limited to parts for shipment to other facilities, the long-term plan would see Gigafactory Mexico add vehicle assembly and battery production.
That’s just the start
The size of the ultimate operation could be substantial, considering that, at $10 billion, the Mexican facility would nearly double the $5.5 billion investment Tesla made in its new Berlin operation.
The choice of a site in Nuevo Leon would not come as a complete surprise, at least not to those who’ve crossed the border between Texas and the Mexican state in recent months. Electrek reported Tesla was given its own lane for its trucks crossing the busy border point. That was later confirmed by Nuevo Leon’s economic minister Ivan Rivas. While some of the automaker’s suppliers are based there, it hinted at other plans to follow since Nuevo Leon parts manufacturers also service Toyota and GM plants in Texas.
The announcement of the Mexican Gigafactory may come as early as Friday, according to Reforma, but might be pushed back into January. Such news could give a boost to an automaker that has taken some unusually negative hits to its image and reputation in recent weeks.
Tesla needs some good news
Much of that is due to the controversial takeover of Twitter by Tesla CEO Musk. Over the weekend, Musk launched a poll on the social media site asking users if he should remain “Chief Twit.” About 57.5% of respondents said he should resign and be replaced as CEO.
Tesla has also faced a series of legal challenges, including lawsuits centered around its semi-autonomous driving technologies, as well as claims of racial discrimination and sexual harassment at its plants. And it has come under investigation by regulatory authorities, one probe having the potential to ban the automaker from selling vehicles in California, the largest state market for EVs in the U.S.
The automaker’s once high-flying stock price has taken a plunge in 2022, falling more than 60% since Musk announced plans to acquire Twitter last April. Half of that decline has come since the deal was consummated. And while there were early signs of an upward bump early Monday, following the completion of the Twitter CEO poll, it lasted just hours. The stock dropped below $150 to end the day, its lowest closing figure in several years.
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