Tesla goes south of the border with a new Monterrey plant
Kinks in the global supply chain and tensions between the US and China have a lot of American firms looking elsewhere for manufacturing.
The backstory: Kinks in the global supply chain and tensions between the US and China have a lot of American firms looking elsewhere for manufacturing. On top of this, US President Joe Biden has been pushing for American-made cars to be eligible for new climate change subsidies and tax breaks. He also wants to make half of all new cars sold in the US zero-emissions vehicles by 2030.
There was a lot of pushback from Canada and Mexico on Biden's plan favoring domestic production. The two countries are big trade partners for the US and felt the plan violated the United States-Mexico-Canada Agreement (USMCA), a free trade agreement between the three. Other politicians were also holding out on passing the bill unless the credits were extended to Canada and Mexico.
More recently: A new version of the bill passed, allowing exceptions for Canada and Mexico. They also won a dispute over duty-free treatment on cars and parts shipped across the borders to the US. This gives American car manufacturers more incentive to move their production to their neighbors north and south to save on costs.
Now, Mexico is positioning itself as a go-to manufacturing destination – especially for EVs. Big car brands like BMW, Ford and General Motors are already setting up shop in the country.
The development: Tesla now has plans to build a new plant in Monterrey, Mexico. This would be Tesla's third manufacturing plant outside the US, joining their established locations in China and Germany. Mexico's President Andrés Manuel López Obrador confirmed the plan and said Tesla CEO Elon Musk would provide more details on Wednesday.
Now, let's talk numbers. The initial investment for this project is reportedly estimated at a cool US$1 billion, but this could skyrocket to US$10 billion in the future.
"I want to thank Mr. Elon Musk, who was very respectful and understood the importance of addressing the problem of water scarcity," said President Andrés Manuel López Obrador.
"This will represent a considerable investment and many, many jobs," said Obrador at a news conference on Tuesday.