Tesla Receives Land-Use Permits For Gigafactory In Mexico's Nueva Leon

Tesla Inc TSLA has received land-use permits from Mexico’s federal environment ministry to build a “gigafactory” in Nuevo Leon.

What Happened: Reuters reports that the state government announced the decision on Tuesday. The designated land for the plant covers approximately 261 hectares (645 acres). The automaker had previously announced plans for a new factory in Mexico in March, without specifying a timeline for construction.

The Nuevo Leon government has estimated the cost of the project to exceed $5 billion, though Tesla has not yet shared a capital cost forecast. Following CEO Elon Musk‘s comments in October about economic uncertainty affecting the factory’s plans, the local government committed to spending over $130 million on infrastructure to support the construction. This includes building an electric power substation, a natural gas pipeline, and various services for water and sewage, as previously reported by Reuters.

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The “Gigafactory” is anticipated to generate an estimated $15 billion over the next two years through Tesla and its suppliers, according to Nuevo Leon Governor Samuel Garcia. Additionally, Mexico views the Tesla project as evidence of the growing “nearshoring” trend, where companies are moving production closer to the United States, away from Asia.

Why It Matters: Tesla’s decision to establish a gigafactory in Mexico aligns with its global expansion efforts and the rising trend of nearshoring. The company has been focusing on increasing its manufacturing capacity to meet the growing demand for electric vehicles. Despite the current economic headwinds, Tesla’s commitment to the Mexican gigafactory highlights its strategic vision for growth and diversification of production locations.

Moreover, the gigafactory in Mexico will likely play a crucial role in Tesla’s future growth, especially considering the company’s significant market share in key markets like China. As of November, Tesla held the second-largest market share for retail sales in China, selling 65,504 new energy vehicles, marking a 4.8% year-over-year increase. This performance reflects Tesla’s solid position in the global electric vehicle market, even amidst competitive and challenging macroeconomic conditions.

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