Tesla and Elon Musk are about to keep a promise.
On January 26, the billionaire entrepreneur announced that the automotive group would reveal the locations of its new factories before the end of the year.
“2022 is the year we will be looking at factory locations to see what makes the most sense with possibly some announcement by the end of this year,” said CEO Musk during the company’s 2021 fourth-quarter earnings.
Last August, he repeated that he hoped to formally announce the location of the clean-energy carmaker’s new gigafactory later this year, in his efforts to produce 20 million vehicles annually by 2030, thus becoming the world’s largest carmaker by production volume.
These remarks have encouraged governments in many countries to court Tesla. Indonesia, South Korea, Canada and many others have dangled the incentives they offer in order to become Tesla’s new land.
Tesla in Mexico?
The company already has four car assembling factories: 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 combined production capacities 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 highly anticipated Cybertruck, in addition to the Model Y.
In Shanghai, the car manufacturer produces vehicles sold in Asia and Europe. However, since the opening of the Tesla plant in Germany in March, the European market should be mainly served by this production site. Giga Shanghai has a production capacity of over 750,000.
The German factory is the only European production site of Musk’s company. It is a car assembly site and a battery development site. It has an annual production capacity of over 250,000.
A new plant should soon be added. 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 carmaker has been finalizing plans to build this vehicle assembly plant in an industrial area of northeastern Mexico. The factory is to be located in Santa Catarina in Monterrey city, the capital of the Nuevo Leon state, Bloomberg News reported.
Final details are still being worked out, and the talks with the company have involved both the state government and Mexico’s foreign relations ministry.
This decision is not really a surprise. Musk was in the area in October and met with local authorities. Additionally, Tesla already has an exclusive customs lane for parts crossing the border into Texas.
It also comes a few days after a victory of Mexico and Canada over the United States on the subject of vehicles shipped across borders. This means that vehicles assembled in Mexico and Canada may be eligible for the new federal tax credits included in the Inflation Reduction Act (IRA), signed last August, to encourage consumers to choose an electric vehicle when buying their future car.
Under the new law, the federal tax credit for EVs remains at $7,500. The eligibility period is from January 2023 to December 2032. The existing tax credit limitation when a car manufacturer has sold the 200,000th unit is eliminated. Tesla, General Motors and Toyota, whose cars no longer benefited from tax credits, are eligible again beginning January 1, 2023.
The tax credit of $7,500 is divided in two: $3,750 will apply if at least 40% of the minerals of the battery powering the vehicle come from the United States or a country having a free trade agreement with the United States.
The remaining $3,750 will apply 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 buy can benefit from the full $7,500 tax credit, half or none, depending on the battery components and minerals.
It is unclear which models will be produced at the new factory.
The company didn’t respond to a request for comment.