Tesla asks Chinese suppliers to set up factories in Mexico

Earlier this year Tesla announced plans to construct its next Gigafactory in Moneterrey, Mexico. The automaker is hoping replicate the successes of Giga Shanghai, a factory that has become a model for efficient vehicle production with a robust and localized supply chain, and as a result is asking its Chinese suppliers to also invest and build factories in Mexico.

One of the key aspects to a productive and profitable Gigfactory is a robust supply chain. Since opening Giga Shanghai Tesla has been able to create exactly that, establishing a strong supply chain that has already reached a localization rate above 95%. With Tesla planning on starting production of its next-generation EV platform in Mexico next year, the automaker is taking what steps it can to create a strong local supply chain ahead of the official opening of the factory.

According to a report from the Chinese media outlet 36Kr, Tesla is actively engaging several of its Chinese supply chain companies to establish manufacturing facilities in Mexico. “Some supply chain companies have received requests to invest and construct factories in that region,” an source familiar with the situation told the publication. The source further revealed that Tesla’s actions reflect a sense of urgency, and that a failure to respond promptly could result in the company potentially losing out on significant orders worth hundreds of millions of dollars.

While Tesla is making these requests of some of their suppliers, others have already beaten them to it. Xusheng Group, a company involved in the production of precision aluminum alloy auto parts, has already announced it will invest more than US$276 million to build a factory in Coahuila, Mexico. The company is hoping to start production at the new factory in July or August 2024, slightly ahead of when Giga Mexico will likely open.

A Chinese manufacturer that supplies Giga Shanghai with production line equipment has also already established offices in Mexico that are responsible for design and after-sales support. While other supply chain companies have gone to the extent of directly relocating their production line workers to Mexico to facilitate the construction of new factories, 36Kr reports.

Tesla has not revealed an official timeline for Giga Mexico, but according to Senior Vice President, Automotive Tom Zhu, he intends to take the factory from ground breaking to the start of production in just nine months. As announced at Investor Day, Gigafactory Mexico will be the first Tesla factory to build the next-generation vehicle. Tesla will then leverage the insights gained from Giga Mexico and incorporate the next-generation platform into their other Gigafactories.

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