Mexican President Andres Manuel Lopez Obrador has announced Tesla will build a new Gigafactory in the northern part of the country in a deal that's worth "in excess of $5 billion." The news does not come as a complete surprise. We first learned the EV automaker was interested in building a new assembly plant in Mexico back in December. The facility will be built in the state of Nuevo Leon, the capital of Monterrey, which also borders Texas. Other automakers, specifically General Motors and Kia, already have production facilities in Nuevo Leon.
Tesla has not announced which vehicles Gigafactory Mexico will produce, with the company's tweet on the matter only claiming it will be the manufacturing location of a "next-gen vehicle." Speaking to Reuters, one Mexican government official said the facility could produce the second-generation Roadster. It's unlikely to be the forthcoming Model 2 small EV, as that is expected to be built in China.
It may be used for multiple models, however, in which case Cybertruck and Semi truck are also candidates, as is Tesla's best-selling model, the Model Y.
To date, Tesla can build 1.9 million vehicles annually at its other Gigafactories, such as its German, Texas, and Shanghai plants.
The addition of a Mexican factory would significantly help boost Model Y output since demand is not expected to decrease, and North American assembly would mean it aids eligibility for IRA tax credits. For the new Gigafactory, Tesla will reportedly shell out at least $1 billion, but further phases and additions could bring that total closer to $10 billion in the coming years.
Mexican authorities, meanwhile, are very much celebrating the occasion. "This will represent a considerable investment and many, many jobs," Lopez Obrador said.
Negotiations have reportedly been taking place between Mexican and Tesla officials for the past 14 months.
The Mexican president said he made it clear to Musk that the country would not grant the carmaker subsidies to make batteries or semiconductors. The Lopex Obrador administration clearly wanted a vehicle-producing Gigafactory because it brings prestige and the possibility for additional investments.
As for the next Tesla Roadster, it was recently reported that it's not a top priority for the company at this time. Semi-autonomous technologies and increasing the scale of production are two key areas where Tesla needs improvement. The new Roadster was first shown as a concept in 2017 and has subsequently been spoken about but never seemed any closer to reality. Instead, Musk chose to focus on the Model S Plaid and now the Cybertruck. The 'next-gen vehicle' built at the new plant - whatever it is - will be crucial for the company's future, as it now has greater competition than ever from legacy automakers.