Giga Mexico hints return of Tesla to North America, says DIGITIMES Research

Jessie Lin, DIGITIMES Research, Taipei 0

Image credit: Bloomberg

With a location in proximity to the Tesla headquarters and a factory area as well as production capacity surpassing Giga Shanghai, Giga Mexico is an indication that Tesla is shifting its EV investment and market focus toward North America amid the US-China tensions. Tesla's move is also bringing its Taiwan-based suppliers to Mexico, according to DIGITIMES Research's latest report on Tesla's capacity expansions.

Tesla plans to build its next gigafactory in Mexico (Giga Mexico) and aims to begin making EVs there in 2025.

Tesla currently has four gigafactories in operation, located in Shanghai, California, Texas, and Berlin. Giga Mexico will be its third facility in North America. As opposed to the annual capacity of 750,000 units at Giga Shanghai, currently the highest among all Tesla's factories, Giga Mexico is set to churn out one million EVs per year. It also covers a ground area 20 times bigger than Giga Shanghai, making it hard to overlook Tesla's strong efforts to shift its EV business focus to North America.

Tesla intended to make Giga Shanghai a major EV production hub, but it is currently facing some headwinds in China, including consumer rights disputes, Tesla vehicles being banned from certain areas due to data security concerns and shrinking market share over fierce competition against local EV makers such as BYD. Tesla's revenues in China have been fluctuating since first-quarter 2022. That is, despite its massive capacity, Giga Shanghai's EV delivery may not be as stable as expected.

Amid US-China trade tensions, Tesla is relocating its EV production back to North America for a number of reasons. First of all, located in the North American free-trade zone, Mexico enjoys reduced tariffs for imports and exports between the US.

Another benefit is the geographical proximity and easy transportation to the US market with an enormous potential EV demand. Based on DIGITIMES Research's projections, EV sales in the US are set to amount to 8.5 million units in 2030, representing tremendous room for growth for Tesla.

With Mexico rising to become a key Tesla production hub, Tesla's Taiwan-based suppliers including Quanta, Pegatron and Foxconn among Taiwan's top-5 ODMs are moving to Mexico to establish production bases. Tesla's key component suppliers including ESON, BizLink and HOTA have also announced their plans to expand their capacity in Mexico to further strengthen their partnerships with Tesla.