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Tesla May Have To Reconsider Its Mexico Plant

Tesla may reconsider plans to build an EV factory in Mexico due to problems with the energy supply of the facility.

A Teslarati report, citing Mexican news outlets, said that Mexico’s federal electricity commission had expressed concern about its ability to supply the potential factory in Nuevo Leon, northern Mexico, with enough electricity.

Meanwhile, earlier this week, a Mexican government official told Reuters that Tesla is considering another location for its new factory—one close to Mexico City.

"Tesla is looking at investing in that area to take advantage of AIFA (Felipe Angeles International Airport)," presidential spokesman Jesus Ramirez told Reuters, adding the EV maker was planning to use the airport as an export hub for the output of the factory.

Tesla has yet to comment on these reports and even confirm plans for a factory in Mexico. If confirmed, the project would be quite lucrative: investments are estimated at between $800 million and $1 billion initially, likely to reach a total of $10 billion, according to Mexican media, cited by Teslarati.

Other locations that the EV maker is still considering for its next gigafactory include Canada, South Korea, and Indonesia. Earlier this month, media reports suggested Tesla was close to signing a deal for a factory in Indonesia with an annual capacity of one million EVs.

Expansion plans, however, may need to be put on the back burner for now after Tesla signaled it was focusing on costs. CFO Zach Kirkhorn said last month that the company was "attacking every other area of cost", after it slashed car prices, sparking worry among suppliers that Tesla would try and pressure them to cut their costs, too, Reuters reported.

Suppliers, however, do not have a lot of freedom with costs because, unlike carmakers, they did not enjoy high prices during the pandemic, which left them with much less space for cost manoeuvering.

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By Charles Kennedy for Oilprice.com

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