Tesla CEO Elon Mots said during Tuesday’s earnings conference that Tesla’s plans to construct a new mega factory in Mexico have been put on hold until after the U.S. Presidential election because former President Trump pledged to slap a tariff on cars manufactured in Mexico.
Musk was then asked to give an update about Tesla’s plans to build the Gigafactory Mexico near Monterrey which was announced in 2023.
Musk responded, “We are currently on pause with Giga-Mexico.” “I believe we need to wait and see what happens after the elections.”
“Trump has stated that he would impose heavy tariffs on cars produced in Mexico. It doesn’t make any sense to invest in Mexico at this time.” Musk said that we’ll have to wait and see how the political situation plays out.
Tesla hasn’t revealed which products or vehicles it will produce at its Mexico factory. Musk said that Tesla is making up for this pause by increasing the production capacity of existing factories, including those for the Robotaxi robots and Optimus robots.
He added, “However we are increasing our capacity at existing factories quite substantially, and I should mention that the Robotaxi gets produced at our headquarters in Giga Texas as well as Optimus by the end of the year for Optimus version two. The high-volume version will also be manufactured here in Texas.”
In a speech he gave in March, former President Trump stated that he would impose 100% tariffs on cars made in Mexico by Chinese automakers to be imported into the U.S. He said, “We are going to put 100% tariffs on every car that crosses the line. And you won’t be able to sell these guys if I am elected.”
He repeated some of this stance in his speech at the Republican National Convention last week.
Musk’s uncertainty over the possible scale and application to U.S. carmakers who build cars in Mexico comes as no major Chinese automakers currently have production facilities in Mexico, although one company has thought about building manufacturing capacity there to gain a foothold on the North American market.
BYD has considered building a factory, an EV manufacturer that is low-cost and doesn’t sell in the U.S. but competes with Tesla in markets such as China. In May, the company said to Reuters that it planned to choose a location in Mexico before 2024.
Former President Trump had extensive trade negotiations during his first term of office with Mexico and Canada about the automotive manufacturing industry. He did this after withdrawing from the North American Free Trade Agreement.
NAFTA is replaced by the United States-Mexico-Canada Agreement. According to the USMCA agreement, automobile components must be made in the U.S. for them to avoid tariffs. This is an increase over the NAFTA threshold of 62.5%.
The USMCA included new requirements, including that at least 70 percent of an automaker’s steel and aluminum purchases must originate in North America. It also contained a rule on labor value content that required that a certain percentage of vehicles be produced by employees who earn an average wage of at least 16 dollars per hour.