Cold Feet in Mexico
Tesla has apparently had a difficult time in getting the construction of their new Gigafactory started in Mexico - and now it looks like true construction won’t be starting until 2024.
Tesla’s new facility in Nuevo Leon, Mexico has been the subject of some excitement ever since it was announced back at the Investor’s Day event in March. During the presentation, it was announced that a strip of land near Santa Catarina had been chosen, and survey work was already beginning.
This new facility, they said, was where Tesla intends on showcasing much of their new manufacturing processes - and where they want to produce their new 25 thousand dollar vehicle platform. But things have changed since March.
First, the environmental surveys took a little more time than expected. The land Tesla had purchased was a 4200 acre plot of arid desert - and a lot of work was going to be needed to get the water Tesla would be needing to manufacture vehicles there.
But when last we looked in on the project, it seemed that all of those problems had been solved - the permits had been signed, and the local Mexican government was eager to get things started. Heavy vehicles were spotted preparing the site for construction, and it looked like we’d be seeing steel go up inside of the month. That was back in August.
Something has changed that is making Tesla hesitate - and luckily, the 3rd quarter earnings call happened on October 18th, with CEO Elon Musk explaining what the hold up in Mexico is: Interest rates.
It seems that with the global economy the way it is right now, Tesla is reconsidering its approach to building their new facility. Musk said that the company is definitely still going to build the Mexico Gigafactory, but that, “The question is really just one of timing.”
Normally of course, once a Tesla project breaks ground, it’s a full sprint to finish construction. With GigaShanghai for instance, construction began in January 2019, and by December of that year cars were rolling off the line.
Knowing that Tesla is being cautious here makes some previous decisions make more sense though. Back in September we got the news that Elon had changed the initial production location of the new 25K model to GigaTexas - and at the time it made sense, considering Tesla’s best and brightest engineers were working there already for the Cybertruck rollout.
Now we know it was also because the company was unsure if they could afford to build and activate GigaMexico at the pace they had originally planned on.
But it’s not all bad news - like Elon said, Tesla is still planning on building the factory in Nuevo Leon - and we don’t have to take their word for it because the Santa Catarina government is planning on helping the company along with over $130 million worth of infrastructure improvements.
One of the harder parts of building this facility was that Tesla was going to have to shoulder that burden - bringing in water, electricity, gas, internet service, and paying to have the roads reinforced and widened so they can even get materials to the site in the first place.
That’s pretty normal for a company to do, and it’s often included in their investment offer to a location - but it looks like the local government really wants to see this facility built, so they’re offering to foot that bill.
So it looks like plans for GigaMexico will have to at least slow down while the company waits for a more solid financial footing. It’s a good thing they have plenty of other factories to make their new vehicle at.