Tesla aims to recreate Giga Shanghai production in Mexico amid lukewarm reception from the U.S.

U.S. officials have expressed concern about the potential for Chinese companies to supply Tesla and its new factory, which is set to produce its next-gen platform. Reportedly, Tesla CEO Elon Musk has sought to replicate the production line of Giga Shanghai by inviting Chinese suppliers to Mexico. The efficient supply chain for parts in China, coupled with a 2018 trade war initiated by the Trump Administration, resulted in Chinese industrial companies acquiring significant industrial park space in Mexico.

According to a report from *Finsa*, Chinese industrial companies possessed 9.31 million square feet of industrial park space in Mexico by 2023, up from just 1.28 million in 2019. Tax lawyers in the U.S. have indicated that as long as no battery minerals or components are sourced from China, the full tax credit can still be applied. This loophole presents a complication as it could lead to the production of cheap EVs that may not necessarily be built in the U.S. but still qualify for the tax credit, potentially to the detriment of the U.S. workforce and economy.

Additionally, the influx of Chinese companies in Mexico extends beyond EV makers. Battery companies, such as CATL, the world’s largest battery manufacturer, are also considering establishing factories in Mexico. This surge in Chinese companies setting up in Mexico has led to a decline in direct exports to the U.S., reaching the lowest rate since 2010 in 2023.

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