At this year's first Investor Day on March 1, Tesla announced its plans to build a new large Gigafactory in Mexico on a 4,200-hectare site in Monterrey, about 200 kilometers south of the U.S.-Mexico border. One of the main reasons Tesla chose Mexico is because of the Inflation Reduction Act (IRA), which provides incentives for automakers to produce their vehicles in North America, with the definition including the U.S., Canada, Puerto Rico and Mexico. This applies to both final vehicle assembly and parts production.
To ensure they are able to take advantage of these incentives, Tesla worked with its Chinese suppliers early on to ensure they set up their own factories in Mexico to support the Gigafactory. According to sources within the Chinese supply chain who spoke to the Late Post media outlet, Tesla is now telling its partners that they should be ready to supply Gigafactory Mexico in the first quarter of 2025, about six months later than originally planned. So far, there is no sign of construction starting.
The reason Tesla has reportedly given for the delay is that building the factory in Mexico is proving more difficult than expected. However, logistical obstacles also include higher capital expenditures than expected, higher labor costs and poorer existing infrastructure. The factory is estimated to cost $10 billion. Tesla had aimed to copy Giga Shanghai's efficient supply chain model, where more than 95% of components are sourced locally.
Once operational, the factory is expected to produce the next generation of Tesla's vehicle platform, which will be significantly cheaper to manufacture and therefore sell at a lower price than existing Tesla vehicles.
