In this report I am about to tell you why Tesla's new location choice for its next gigafactory is at least strange and I am going to explain two major advantages that it will offer. Talking about one of those advantages I will make a reference to Elon Musk's earlier announcement about Tesla's future plans. This is why, by choosing Mexico, Tesla is preparing to realize its next major plan. So please, stay with me to the end, as I am also going to leave you with one question for you to decide if my assumptions are plausible.
So, after Mexican news sources broke the news, Bloomberg reported that Tesla is reportedly finalizing plans to build an electric car assembly plant in an industrial area of northeastern Mexico and may announce the factory as early as this week, that means before Christmas. I said if Tesla is that close to announcing the Gigafactory Mexico, the location is strange because in that case this new gigafactory will be about 390 miles away from Giga Texas. Why would Tesla build another gigafactory that close to Giga Texas?
I have three reasons. What do you think about them? And which of these three reasons is the most important consideration if you were a Tesla executive?
First: Possible EV Tax Credit. Bloomberg thinks a Mexican-made electric vehicle by Tesla would likely qualify for subsidies under recent US legislation signed into law, as long as it met battery content requirements. But at this time it’s unclear which models Tesla will produce in its Mexican factory or when it would begin production.
This brings me to my second point. Tesla is choosing Mexico, as the location for its next Gigafactory, to make affordable Tesla vehicles there. I mean, Tesla possibly wants to make the $25,000 electric vehicle in Mexico and bring it to the US market, just like some other car companies do. Tesla has been working on a model smaller than the Model 3 and Model Y for some time now. We don't want to talk about exact [launch] dates, but this [new model] is the main focus of our vehicle development team. We're going to take everything we learned from the [Model] S, X, 3 and Y, the Cybertruck and the Semi on that platform. We are trying to get to [a cost reduction] of 50% again”, Musk said.
Knowing that Tesla wants to keep the production and markets as close as possible Mexico would be a great place to build cheaper electric vehicles and bring them to the US market.
And this brings me to my third point. The closest place to the US market, where Tesla can cost-consciously make its affordable $25,000 electric vehicles, would be Mexico. Tesla can get cheap labor in Mexico. Labor costs are lower in Mexico than in the United States and Tesla may want to take advantage of that economic opportunity. As a result about five to ten thousand Mexican people and their families will have higher paying jobs per local standards.
Here we go: three distinct benefits for Tesla to choose Mexico as the location for its next Gigafactory. Are there any other reasons and benefits that I didn't list here? Please, list them in the comments section below.
Armen Hareyan is the founder and the Editor in Chief of Torque News. He founded TorqueNews.com in 2010, which since then has been publishing expert news and analysis about the automotive industry. He can be reached at Torque News Twitter, Facebok, Linkedin and Youtube.