Elon Musk, CEO of Tesla, made the announcement Wednesday that the company’s next vehicle assembly plant would be built in Mexico, close to Monterrey.
We’re very enthusiastic about it,” Musk said at an investor day for the company. We plan to keep increasing output at each of our current manufacturing facilities. Therefore, no output is being routed to or from anywhere. What we have here is supplementary output.
The company’s four plants in Fremont, California; Shanghai, China; Austin, Texas; and Berlin, Germany can produce 2 million vehicles annually. It plans to produce 20 million vehicles annually. In 2022, the company shipped out slightly over 1.3 million automobiles. Toyota, the world’s largest automaker, delivered slightly more than 10 million vehicles worldwide in 2022.
Tesla did not provide details on how much the new plant would cost. This news solidified the intentions of Mexican President Andres Manuel Lopez Obrador to have Tesla construct its next manufacturing facility in his country. Mexican officials reportedly estimated that the plant could cost as much as $1 billion, according to Reuters.
When added to the existing $28 billion in investments, the company estimates that the total cost to build the additional plants necessary to reach 20 million vehicles will be between $150 billion and $175 billion.
Perhaps this total investment appears large, CFO Zachary Kirkhorn admitted. According to the scale of our goals, I find it to be rather modest.
On Wednesday, the company announced that, overall, it had produced 4 million vehicles.
After Musk’s announcement more than three hours into the presentation, Tesla shares (TSLA) dropped more than 5% in after-hours trading Wednesday. Some shareholders anticipated that Tesla (TSLA) would reveal information about the company’s next generation of vehicles. When asked about the next-generation vehicle, Musk dodged the question.
Musk has promised an official product unveiling. If we answered that question now, we’d be premature.
In response to another analyst’s question, Musk stated that he does not believe Tesla will ever offer more than ten vehicles. He sneered at the extensive lineups of rival automakers, calling them a “shuffling” of largely interchangeable models.
Tax credits of up to $7,500 were reinstated for buyers of the Model 3 and Model Y, Tesla’s two cheapest vehicles, under the Inflation Reduction Act, which was passed last year. The vehicles must be assembled in North America to be eligible for the tax credit, so the end product from the plant in Mexico should be eligible.
Mexico is home to assembly plants for most of the world’s major automakers. Twenty automobile manufacturing facilities are located here, reports Reuters. Ford has 2, and GM has 3, but only one of them produces the Mustang Mach-E, an electric SUV that competes with Tesla. Stellantis has three assembly lines where it produces vehicles for the Chrysler, Dodge, Ram, and Jeep brands.
In addition, Mexico is home to manufacturing facilities for a number of automotive industry heavyweights, including Toyota, Honda, Nissan, Volkswagen, Audi, Mazda, Mercedes, Kia, and BMW.
Before the pandemic, Mexican assembly plants were turning out just under 4 million automobiles annually, as reported by the US Trade Administration (part of the Commerce Department). This was before the pandemic drastically cut the supply of auto parts, particularly computer chips, and automobile production worldwide. Approximately 3.5 million automobiles were manufactured by them in 2017. This ranks it as the seventh-largest nation in terms of vehicle manufacturing.
However, 90% of the vehicles it manufactures are shipped overseas, with the majority (76%) going to the United States.