The government of Nuevo Leon, a northern state in Mexico, has confirmed that Tesla is still planning to build a factory in the region, despite CEO Elon Musk’s recent comments that he was hesitating on the project. The state said that it would spend more than $130 million on infrastructure to support the construction of the factory, which is estimated to cost $5 billion.

Tesla announced the planned factory in March 2023, without providing a timeline for construction. The factory would be located in the Santa Catarina municipality, about 20 kilometers from the state capital of Monterrey. The project is expected to create thousands of jobs and boost the local economy.

Tesla’s Mexico Factory Plans Still On Track Despite Musk’s Doubts
Tesla’s Mexico Factory Plans Still On Track Despite Musk’s Doubts

Musk Cites Global Economic Factors as Reason for Delay

Musk, however, said on Wednesday that he was still set on the site in Mexico, but that the timing was uncertain due to global economic factors, and construction likely would not begin until next year. He cited concerns over high interest rates affecting affordability for car buyers, as well as supply chain issues and environmental regulations.

“The question is really just one of timing … we think we’ll start the initial phases of construction next year,” Musk said during a conference call with analysts.

Musk also said that the company was “laying the groundwork to begin construction” in Mexico but did not yet have more definite plans. He added that the factory would produce vehicles for both the North American and Latin American markets.

Mexico Hopes to Attract More Nearshoring Investments

Mexico has touted the Tesla project as proof of the “nearshoring” trend, which refers to companies moving production away from Asia and setting up operations closer to the United States. The country hopes to attract more investments from global automakers and suppliers, especially in the electric vehicle sector.

Nuevo Leon Governor Samuel Garcia, who visited Shanghai on Wednesday, announced nearly $1 billion in expected investments from Chinese Tesla suppliers. He said that he spoke with Musk by phone this week to discuss the project and that he was confident that it would go ahead.

“We are very happy with Tesla’s decision to invest in Nuevo Leon. We are working hard to provide them with all the necessary conditions and incentives to make this project a success,” Garcia said in a statement.

Local Officials Prepare Infrastructure for Tesla’s Factory

Meanwhile, local officials in Santa Catarina said that they were beginning to improve infrastructure in the area where Tesla is set to build the factory. The mayor of Santa Catarina, Jesus Nava, said that the state and municipal governments were moving ahead with studies for the infrastructure requested by Tesla, which would amount to more than 2.5 billion pesos ($136.46 million) provided by the state.

“We hope in the first half of 2024 to have the start of Tesla’s construction,” Nava said in a statement.

The infrastructure projects include road improvements, water supply, electricity, gas, and telecommunications. Nava said that these would benefit not only Tesla but also other existing and potential investors in the region.


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