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Tesla Building Giga Factory in Monterrey
Tesla is building its next giga factory in the northern city of Monterrey, according to the president of Mexico, Andrés Manuel López Obrador. This comes after a meeting with Elon Musk on Monday.
This is a huge win for the country of Mexico, as the world's leading manufacturer of electric vehicles (EVs) is coming to their country to set up shop. Mexico will benefit from this with an easing of geopolitical tensions and attract investment and increase its economic status.
There have been many questions about the exact location of Tesla's next giga factory, and it appears we finally have the answer - Monterrey, Mexico. Initially, there were reports that the factory would be built in Mexico City or Nuevo León - which is near Monterrey.
As is usual, rumors were close, but not quite accurate. Monterrey is about a 6.5-hour drive from Giga Texas, meaning that the Tesla Semi could quite possibly do deliveries to this new giga factory.
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What This Means for Tesla
Some wonder if this information is true because Elon Musk and Tesla have not announced it yet. I think we'll hear about this at Investor Day tomorrow, but for now, I think we should take the President of Mexico at his word on this.
This is a very good thing for Tesla - there are so many advantages for Tesla to do this, and we'll go over those now. Let's analyze data and facts related to labor costs, logistics, and trade agreements to make the case for building a giga factory in Monterrey, Mexico.
Labor Costs
One of the primary advantages of building a giga factory in Monterrey is the low labor costs in the region. According to data from the World Bank, the average hourly wage in Mexico is significantly lower than that of the United States, where Tesla's existing giga factories are located.
In 2020, the average hourly wage in Mexico was $3.70, while in the United States, it was $23.86.
This significant difference in labor costs means that building a giga factory in Monterrey would result in lower manufacturing costs for Tesla. The company could potentially pass these savings onto its customers, making its vehicles more affordable and competitive in the global market.
I see Tesla building a compact car or Model 2 in this giga factory. It might even export these to the United States because the cost to build them in Mexico will be less. However, they may not get the $7,500 IRA tax credit if Tesla does this.
Logistics
Another advantage of building a giga factory in Monterrey is its location. Monterrey is situated in northern Mexico, close to the border with the United States. This makes it an ideal location for exporting Tesla's vehicles to the United States and other markets in North and South America.
In addition, Monterrey has a well-developed transportation infrastructure, with several major highways, railways, and an international airport. This infrastructure would allow Tesla to efficiently transport raw materials and finished products to and from the factory, reducing transportation costs and improving supply chain management.
Trade Agreements
Mexico is a signatory to several trade agreements that make it an attractive location for manufacturing.
The most notable of these agreements is the United States-Mexico-Canada Agreement (USMCA), which replaced the North American Free Trade Agreement (NAFTA) in 2020. The USMCA provides a framework for free trade between the United States, Mexico, and Canada, reducing trade barriers and tariffs on goods produced in the region.
Tesla can take advantage of the reduced tariffs on exports to the United States and Canada. In addition, Mexico has signed trade agreements with several other countries, including Japan, the European Union, and several Latin American countries, further expanding the potential markets for Tesla's vehicles.
Building a giga factory in Monterrey, Mexico, provides significant economic benefits for Tesla. The low labor costs in the region will result in lower manufacturing costs, making Tesla's vehicles more affordable and competitive in the global market.
The city's location and transportation infrastructure make it an ideal location for exporting vehicles to the United States and other markets in North and South America. Finally, the trade agreements that Mexico has signed with several countries provide Tesla with access to new markets and reduced trade barriers.
Overall, the economic data and facts strongly suggest that Tesla did the right thing in choosing to build a giga factory in Monterrey, Mexico.
In Related News: Elon Musk Gives Nod to Model 3 - Project Highland
NEWS: Tesla will build a major new plant in the northern Mexican city of Monterrey, President Andres Manuel Lopez Obrador said on Tuesday. Lopez said the two sides had reached agreement after a call with Elon Musk on Monday. https://t.co/T1dcYVemYS— Sawyer Merritt (@SawyerMerritt) February 28, 2023
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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter or LinkedIn to stay in touch and follow his Tesla news coverage on Torque News.
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