Tesla: Elon Musk presses the stop button for Gigafactory in Mexico

Tesla CEO Elon Musk announced on Tuesday that he will halt the construction of the planned Tesla Gigafactory in northern Mexico. Musk explained that he wants to wait for the outcome of the US elections on November 5 to decide whether the project will go ahead. The billionaire cited Republican presidential candidate Donald Trump's intention to impose tariffs on cars manufactured in Mexico as the reason for the investment freeze. "It doesn't make sense to invest in Mexico if that's going to happen," Musk said in a conference call with analysts and media representatives, as reported by the Mexican business newspaper El Economista.

In March last year, Musk announced the construction of a Tesla factory in Santa Catarina in the metropolitan area of Monterrey in the state of Nuevo León with much fanfare, but without giving a timetable for construction or details. There is talk of an investment of five billion US dollars. Despite water shortages in the region, the government in Mexico City gave the green light for the construction of the plant. However, there have recently been repeated rumors that Tesla would not build a plant in Mexico at all. Musk also repeatedly expressed concerns.

One thing is certain: Tesla has not yet started construction work. So now the future of the plant will depend on the outcome of the election in the United States. "I think we'll have to wait and see what happens in the election. Trump has said that he will impose high tariffs on vehicles manufactured in Mexico. So it wouldn't make sense to invest in Mexico," said Musk. Yet he is considered an avid supporter of Trump.

Tariffs on Chinese cars

The Republican presidential candidate has repeatedly stated that he will impose tariffs on imports of vehicles manufactured in Mexico. He fears that Chinese companies in particular will assemble vehicles in the neighboring country and then sell them duty-free across the border. He is not alone in the USA with this stance. Chinese investments in Mexico, particularly in assembly plants for the automotive industry, have also recently led to tensions between the current governments of Mexico and the United States. The Joseph Biden administration also sees the establishment of Chinese companies in the neighboring country as a threat to national security. US parliamentarians from both major parties have expressed concern that China could use Mexico to gain access to the US market for its goods. Together with the USA and Canada, Mexico is part of the North American Free Trade Agreement USMCA (formerly NAFTA). Only recently, the US government announced that a 100% tax will be levied on electric vehicles produced in China in future.

This is probably one of the reasons why more and more Chinese car manufacturers are setting up shop in Mexico in order to target the US market from there. Just recently, there were media reports that the Chinese car manufacturer Changan was looking into setting up an assembly plant in Mexico. Chinese commercial vehicle giant Dongfeng is also planning to open a new plant in Mexico by 2025, while BYD, the world's largest manufacturer of electric cars, is pressing ahead with its plans to open a factory in Mexico. Although the Chinese company intends to produce primarily for the Mexican market, it is also likely to expand into other markets in the medium term. The new plant is expected to create 10,000 jobs and would therefore be the same size as the German Volkswagen Group's factory in Puebla.

Disappointing Tesla business figures

Tesla, one of BYD's main competitors, is a completely different story. The idea behind Tesla's billion-euro investment in Mexico is not very different from the Chinese plans: Assemble vehicles at a much cheaper price and then sell them in the United States. A practice known as near shoring. The start of construction of the Tesla factory has already been postponed twice, first to 2024 and then to 2026.

Trump's threat of tariffs on cars produced in Mexico as justification for Musk's decision to suspend construction is described as a "pretext" in Mexico itself. The Mexican daily La Jornada, for example, suspects that this is due to the fact that Tesla has reported disappointing profits for the fourth quarter in a row. Almost at the same time as the decision against the plant in Mexico, Tesla reported a 45 percent drop in profits. Despite increasing turnover, Tesla made less profit than in the previous year. The presentation of the Robotaxi was also postponed.

(akn)