Tesla Encourages Chinese Suppliers to Build Factories in Mexico

According to a report by 36Kr, Tesla is said to be mobilizing numerous Chinese supply chain firms to establish factories in Mexico. The pace set by Tesla is quite pressing. As stated by one of the suppliers, “There are concerns about losing billions in large orders if there’s a delay in responding to the move.”
Several China-based suppliers have already begun moving their operations to Mexico, following in Tesla’s footsteps. For instance, the Xurise Group announced at the end of March this year that it would invest in a production base in Mexico, with a total investment of no more than $276 million USD.
“Mexico is now a hotbed for investment, and many clients have already arrived,” revealed one industry insider. Some supply chain companies have even brought their production line workers to Mexico to build factories.
During Tesla’s Investment Day this year, CEO Elon Musk announced that the company would establish its fifth Gigafactory in Monterrey, the capital of Nuevo León state in Mexico. Government officials have indicated that the investment in this new factory would exceed $5 billion USD, with a planned production capacity of one million vehicles. However, considering the land use plan, there is still room to increase the production capacity, which may even exceed that of the Shanghai factory in the later stages.

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Currently, the “USMCA agreement” and other policies have provided favorable guidance for Mexico in exporting whole vehicles and parts to the United States. Supply chains going abroad will also receive tax benefits and talent subsidies.
However, the social and geopolitical risks in Mexico are relatively high, and considerations of marginal benefits must be made when building factories locally. This move by Tesla and its Chinese suppliers signifies a strategic expansion into a new frontier, despite the potential challenges.