Tesla and Elon Musk are about to fulfill a promise.
On Jan. 26, the billionaire entrepreneur announced that the auto group would reveal the locations of its new factories before the end of the year.
“2022 is the year we will be looking at plant locations to see what makes the most sense with possibly an announcement by the end of this year,” CEO Musk said during the company’s fourth quarter 2021 results.
Last August, he reiterated his hopes to formally announce the location of the automaker’s new clean-energy gigafactory later this year, as it aims to produce 20 million vehicles annually by 2030, becoming the largest automaker in the world by production volume. .
These comments have encouraged governments in many countries to take Tesla to court. Indonesia, South Korea, Canada and many others have dangled the incentives they offer to become Tesla’s new country.
Tesla in Mexico?
The company already has four car assembly plants: Austin, Texas and Fremont, California in the United States, Shanghai in China and Berlin in Germany.
The first two mainly serve the North American market and have a combined production capacity of 900,000 vehicles per year, according to Tesla. They produce all models of vehicles sold by Tesla: Model 3, Model Y, Model X, and Model S.
From mid-2023, the Austin plant will also produce the much-anticipated Cybertruck in addition to the Model Y.
In Shanghai, the automaker produces vehicles that are sold in Asia and Europe. However, since the opening of the Tesla factory in Germany in March, the European market should mainly be served by this production site. Giga Shanghai has a production capacity of more than 750,000.
The German factory is Musk’s company’s only European production location. It is a car assembly site and a battery development site. It has an annual production capacity of more than 250,000.
A new plant will be added soon. Tesla is expected to announce the location of its new factory this week, according to Bloomberg News citing anonymous sources close to the matter.
The automaker has finalized plans to build this vehicle assembly plant in an industrial area in northeastern Mexico. The factory will be located in Santa Catarina in the city of Monterrey, the capital of the state of Nuevo Leon, Bloomberg News reported.
Final details are still being worked out and talks with the company involve both the state government and the Mexican foreign ministry.
This decision is not really a surprise. Musk was in the area in October and met with local authorities. In addition, Tesla already has an exclusive customs slip for parts crossing the Texas border.
It also comes a few days after a victory for Mexico and Canada over the United States on cross-border vehicles. This means vehicles assembled in Mexico and Canada may be eligible for the new federal tax credits included in the Inflation Reduction Act (IRA), which was signed last August, to encourage consumers to choose an EV when the purchase of their future car.
Under the new law, the federal tax credit for EVs remains $7,500. The eligibility period is from January 2023 to December 2032. The existing limitation on the tax credit when a car manufacturer has sold the 200,000th unit will be lifted. Tesla, General Motors and Toyota, whose cars no longer benefited from tax credits, will be eligible again from January 1, 2023.
The $7,500 tax credit is split in half: $3,750 applies if at least 40% of the minerals of the battery powering the vehicle come from the United States or a country that has a free trade agreement with the United States.
The remaining $3,750 applies if at least 50% of the battery components come from the United States or from countries with a free trade agreement with the United States. In summary, the electric vehicle you purchase can benefit from the full $7,500 tax credit, half or none, depending on battery components and minerals.
It is unclear which models will be produced in the new factory.
Tesla will not be the only automotive group to produce vehicles in Mexico. General engines (GM) – Get a free report and Ford (F) – Get a free report are already established there.
The company did not respond to a request for comment.