Tuesday, May 28, 2024

Tesla welcomed to build next plant in Mexico near Monterrey

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Tesla’s CEO Elon Musk announced on Wednesday that the next Tesla vehicle assembly plant is to be set up in Mexico near Monterrey

“We’re super excited about it,” Musk said during an investor day for the company. “We’ll continue to expand production at all of our existing factories. So this is not moving output to anywhere, from anywhere. This is supplemental production.”

The company currently has capacity to build about 2 million cars a year at four factories, in Fremont, California; Shanghai, China; Austin, Texas; and Berlin, Germany. It has set a goal of eventually building 20 million cars a year. The company delivered just over 1.3 million cars in 2022. The largest automaker in the world by production volume, Toyota, delivered just over 10 million cars globally in 2022.

Tesla did not comment on the cost of the new plant. The news was a confirmation of plans announced Tuesday by Mexican President Andres Manuel Lopez Obrador for Tesla to build its next factory in the country. Reuters reported that Mexican officials said the plant could cost $1 billion.

The company estimates to build the additional plants needed to reach 20 million vehicles will cost a total of $150 billion to $175 billion, including the $28 billion in investment that it has already made in its history.

“Maybe this total investment looks large,” said CFO Zachary Kirkhorn. “I think its quite small relative to our ambitions.”

The company also announced that earlier Wednesday it built 4 million vehicles in its history.

Shares of Tesla (TSLA) slipped more than 5% in after-hours trading Wednesday, although that was up a bit from a larger decline before Musk’s announcement more than three hours into the presentation. There had been hope by some investors that Tesla (TSLA) would announce details about a next generation of vehicles. Musk declined to answer a question about the next generation vehicle.

“We will have a proper sort of product event,” Musk said. “We’d be jumping the gun if we were to answer that question.”

In response to another question from an analyst, Musk said he doesn’t anticipate Tesla ever having more than 10 different vehicles in its product lineup. He derided the broad offerings of competing automakers as simply a “shuffling” of many similar models.

The Inflation Reduction Act passed last year restored tax credits of up to $7,500 to buyers of the less expensive Tesla cars, the Model 3 and Model Y, as long as their list price is under $55,000. To qualify for the tax credit, the cars must be assembled in North America, so the eventual output from the plant in Mexico should qualify.

Most of the global automakers already have assembly plants in Mexico. According to Reuters, there are 20 auto assembly plants in the country. General Motors has three, Ford has two, including one that make its Mustang Mach-E, the EV SUV that is a competitor to Tesla. Stellantis — which builds cars under the Chrysler, Dodge, Ram and Jeep brands — has three.

In addition Toyota, Honda, Nissan, Volkswagen, Audi, Mazda, Mercedes, Kia and BMW all have plants in Mexico.

According to statistics from the US Trade Administration, a part of the Commerce Department, Mexican plants were producing just under 4 million cars a year in the years before the pandemic reduced the supply of auto parts, particularly computer chips, and auto production worldwide. They produced about 3.5 million cars last year. That makes it the seventh largest country in terms of auto production.

Source: CNN and other internet sources.

But 90% of the cars it builds are exported, with 76% destined for the United States.

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