Tesla To Take Its Time Building New Plant In Mexico Amid Economy Woes

Tesla CEO Elon Musk adopted a rather pessimistic tone on Wednesday’s third-quarter earnings call, and it was not just about the Cybertruck – the Giga Mexico plant was also mentioned in the same bleak context.

While he said he wanted to “temper expectations” about the Cybertruck, blaming the product’s unique complexities for the slow production ramp-up, he was also cautious when talking about the company’s future plant in Mexico.

He noted that Tesla is moving forward on plans to build the Giga Mexico facility to produce affordable vehicles, but the company is not in a rush to do so because of worries about the global economy.

“In Mexico, we’re laying the groundwork to begin construction and doing all the long lead items, but I think we want to just get a sense of what the global economy is like before we go full tilt,” he said on the call.

He sounded particularly worried about high interest rates, saying they are making it difficult for buyers to afford new vehicles. Musk warned that if interest rates remain high or grow even higher, it will be that much harder for people to buy a car since most buyers use some form of financing when purchasing a vehicle.

“I’m not saying things will be bad, I’m just saying they might be,” Tesla‘s head honcho said about his cautious outlook on the economy. He added that he may be “more paranoid” than necessary because he remembers how General Motors and Chrysler were pushed into bankruptcy in 2009 by the Great Recession.

Still, Tesla will push the accelerator once again if the situation improves, Musk reassured investors. “If interest rates come down, we will accelerate,” he said in reference to the Mexico plant. Should Tesla need more capacity before Giga Mexico starts operating, Musk noted that the plant in Austin, Texas, has significant room to expand vehicle production.

In response to Musk’s comments, the Mexican state of Nuevo Leon where the future plant site is located vowed to provide funding for the factory’s construction. On Thursday, October 19, local authorities announced they would spend over $130 million on infrastructure to support the construction of Giga Mexico, according to Reuters. 

The mayor of the city of Santa Catarina said local officials are improving infrastructure in the area to prepare for Tesla’s Giga Mexico. 

“At the state and municipal level, we’re moving ahead with studies for the infrastructure requested by Tesla, which will amount to more than 2.5 billion pesos ($136.5 million) provided by the state,” Mayor Jesus Nava said. “We hope in the first half of 2024 to have the start of Tesla’s construction.”

Tesla first announced plans to build a new vehicle factory in Mexico at the Investor Day event in March 2023. The company said it would build its next-generation platform there, which is expected to underpin both the $25,000 entry-level EV and the Robotaxi.