Tesla will build its next factory in Mexico

New York (CNN) Tesla’s next vehicle assembly plant will be in Mexico near Monterrey, CEO Elon Musk announced Wednesday.

“We’re very excited about this,” Musk said at an investor day for the company. “We will continue to ramp up production at all of our existing factories. So it’s not moving production to anywhere, from anywhere. It’s incremental production.”

The company currently has the capacity to build approximately 2 million cars per year at four plants, in Fremont, California; Shanghai, China; Austin, TX; and Berlin, Germany. It has set itself the goal of eventually building 20 million cars a year. The company delivered just over 1.3 million cars in 2022. The world’s largest automaker by production volume, Toyota, delivered just over 10 million cars worldwide in 2022.

Tesla did not comment on the cost of the new factory. The news was a confirmation of plans announced Tuesday by Mexican President Andres Manuel Lopez Obrador for Tesla to build its next factory in the country. Reuters reported that Mexican officials said the plant could cost $1 billion.

The company estimates that building the additional factories needed to reach 20 million vehicles will cost a total of between $150 billion and $175 billion, including the $28 billion in investment it has already made over its history.

“Perhaps this total investment seems significant,” said chief financial officer Zachary Kirkhorn. “I think it’s quite small compared to our ambitions.”

The company also announced that earlier Wednesday it had built 4 million vehicles in its history.

Shares of You’re here (TSLA) slid more than 5% in after-hours trading on Wednesday, though that was up a bit from a larger drop before Musk’s announcement more than three hours after the presentation began. Some investors had hoped Tesla would announce details about a next generation of vehicles. Musk declined to answer a question about the next-generation vehicle.

“We’ll have some sort of proper product event,” Musk said. “We would take the leap if we had to answer that question.”

In response to another question from an analyst, Musk said he doesn’t anticipate Tesla ever having more than 10 different vehicles in its product line. He derided the broad offerings of competing automakers as simply being a “mix” of many similar models.

The Cut Inflation Act passed last year reinstated tax credits of up to $7,500 for buyers of the cheapest Tesla cars, Model 3s and Model Ys, provided their list price is lower at $55,000. To qualify for the tax credit, the cars must be assembled in North America, so eventual factory production in Mexico should qualify.

Most global automakers already have assembly plants in Mexico. According to Reuters, there are 20 auto assembly plants in the country. General Motors has three, Ford has two, including one that makes its Mustang Mach-E, Tesla’s competing EV SUV. Stellantis – which builds cars under the Chrysler, Dodge, Ram and Jeep brands – has three.

Additionally, Toyota, Honda, Nissan, Volkswagen, Audi, Mazda, Mercedes, Kia, and BMW all have factories in Mexico.

According to statistics from the US Trade Administration, part of the Commerce Department, Mexican factories were producing just under 4 million cars a year in the years before the pandemic, reducing the supply of auto parts, especially chips. computers, and automobile production in the world. They produced about 3.5 million cars last year. This makes it the seventh largest country in terms of automobile production.

But 90% of the cars it builds are exported, 76% of which go to the United States.

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