By Li Panpan

(JW Insights) Jun 9 -- Tesla is mobilizing Chinese supply chain firms to establish factories in Mexico, JW Insights learned from a report by Chinese tech media 36Kr.

The pace set by Tesla is quite pressing. As stated by one of the suppliers, “There are concerns about losing billions in large orders if there’s a delay in responding to the move,” said the report.

Several China-based suppliers have already begun moving their operations to Mexico, following Tesla’s footsteps. For instance, the Xusheng Group (旭升集团) announced at the end of March this year that it would invest in a production base in Mexico, with a total investment of no more than $276 million. It could be put into production next July or August if things go well, said a source familiar with the project.

“Mexico is now a hotbed for investment, and many clients have already arrived,” revealed one industry insider. Some supply chain companies have even brought their production line workers to Mexico to build factories.

During Tesla’s Investment Day this year, CEO Elon Musk announced that the company would establish its fifth Gigafactory in Monterrey, the capital of Nuevo León state in Mexico.

Government officials have indicated that the investment in this new factory would exceed $5 billion, with a planned annual production capacity of one million vehicles. However, considering the land use plan, there is still room to increase the production capacity, which may even exceed that of the Shanghai factory in the later stages, said a Pandaily report on June 8.

The social and geopolitical risks in Mexico are relatively high, and considerations of marginal benefits must be made when building factories locally. This move by Tesla and its Chinese suppliers signifies a strategic expansion into a new frontier, despite the potential challenges, added the Pandaily report.

(Chen HX)