At Musk's invitation, Chinese auto parts manufacturers have invested in Mexico
According to foreign media reports, Chinese auto parts manufacturers are rapidly building factories on the outskirts of Monterrey, Mexico, so that they can supply Tesla's next factory.
Foreign media quoted sources familiar with the matter as saying that Tesla CEO Elon Musk previously invited Chinese suppliers to build factories in Mexico, thus copying the local supply chain model of Tesla's Shanghai factory to Mexico. Tesla was approved to build a "gigafactory" in Nuevo León, Mexico, late last year, and received a 2.63 billion pesos ($153 million) incentive from the local government. It is reported that Tesla's Gigafactory in Mexico will mainly produce cheaper next-generation electric vehicles.
At the moment, Tesla's Austin plant is not the only one that buys auto parts from Chinese companies from Mexico. The value of Chinese auto parts produced in Mexico and exported to the U.S. reached $1.1 billion in 2023, up 15% from the previous year, according to preliminary data previously unreleased by Mexico's National Association of Automotive Parts Industries (INA). Last year, 33 Chinese auto parts manufacturers registered in Mexico, 18 of which exported products to the United States, according to INA.
Venkatesh Prasad, chief innovation officer at the Center for Automotive Research, said it made sense that Tesla and other U.S. automakers wanted to take advantage of China's "highly organized and efficient supply chain." "Automakers around the world need to control their profit margins, and sourcing Chinese auto parts manufacturers is part of that effort," he said.
Recent Chinese companies investing in Mexico include Ningbo Tuopu Group, Shanghai Bahong Auto Parts Co., Ltd., Dongshan Precision, Yinlun Co., Ltd., and Chinaust Group, a joint venture between Lingyun Co., Ltd. and Switzerland's Georg Fischer AG. These enterprises mainly produce heating and cooling systems, shock-absorbing products, metal parts and other components.
Chinese investment in countries such as Mexico is on the rise. According to Mexican real estate developer Finsa, Chinese industrial companies are using 9.31 million square feet (86.5 hectares) of Mexican industrial park space in 2023, up from 1.28 million square feet (11.9 hectares) in 2019.
Under the 2022 Inflation Reduction Act, signed by U.S. President Joe Biden, electric vehicles assembled in Mexico can also receive up to $7,500 in U.S. consumer tax credits. David Barrera, director of business development at Banco BASE SA, a local Mexican bank, said Chinese companies "eager to become suppliers to Western automakers" are following Mexican business guidelines to open shelters.
Under this model, Chinese companies do not need to set up a company in Mexico, but instead have a shelter service provider provide production licenses, provide employees and lease the factory in the name of the shelter service company. Chinese enterprises provide machinery and equipment and raw materials for production, and organize specific production.
According to foreign media sources, in addition to Chinese auto parts manufacturers, BYD, Chery and SAIC's MG brand have sought to open factories in Mexico. Oscar Silva Eguibar, a consultant at the consulting firm Roland Berger, said the manufacturers could build factories in four years, put production in six years and then export cars to the United States. (Compilation/Mowgli)