US EV pure play Tesla did not offer any dates on when it might start building or aim to complete the new gigafactory it is planning to develop in the Mexican state of Nuevo Leon when it reported its Q4 results in late January. But joining the dots on what it did say points to a schedule later rather than sooner.
The firm has “started the long lead work to get the basics ready”, according to Karn Budhiraj, Tesla’s vice-president, supply chain. This follows the Nuevo Leon state confirming a $152mn incentive package in December, including cash to allow the creation of basic infrastructure, such as drinking and treated water, roads and new transportation routes, for the site just west of the metropolitan area of the state capital Monterrey.
And there is no longer any hint that the project might be paused, which was less the case at Q3 results. "We want to just get a sense for what the global economy is like before we go full tilt on the Mexico factory," Tesla CEO Elon Musk said at that time.
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Going south
When discussing building Tesla’s next-generation, mass-market affordable BEV, Musk says that, while first production of the new vehicles will be the company’s Giga Texas plant in Austin, “probably the factory we will build in Mexico will be second” to make the so-called Model 2. The firm will also look to identify a third location, “perhaps by the end of this year or early next”, that will be outside of North America.
So the mood music is that Mexico will definitely move ahead. But no-one should, from what Tesla executives said, expect it anytime soon.
“As regarding Mexico, we want to first demonstrate success with the next-generation platform in Austin before we start construction,” says Budhiraj. Musk says that “our current schedule shows that we will start production towards the end of 2025” for Giga Texas to begin Model 2 production, but cautions that he is “often optimistic” about timelines.
And he is clear that he is not expecting a quick and smooth scaling up of production, particularly given that there is a “tremendous amount of new revolutionary manufacturing technology here”.
“The reason I wanted to put this new revolutionary manufacturing line at Giga Texas was because we really need the engineers to be living on the line,” Musk continues. “This is not the sort of off-the shelf, just works type of thing. And it is just a lot easier for Tesla engineering to live on the line if it is in Austin versus elsewhere.”
Long road ahead
So he acknowledges that it “will be a challenging production ramp” — which will need to be achieved before even breaking ground in Mexico, according to the timeline Tesla had laid down. And there is no specific timeline for how long the ramp will take.
“It is always difficult to predict what that S-curve of manufacturing looks like. It always starts off real slow, and then it grows exponentially. Predicting that intermediate S-curve is difficult, so it is hard to say what the unit volume would be next year,” says Musk.
But the Model 3 is offered as a potential example, given that, according to Budhiraj, Tesla “plan[s] to follow our recipe from the 3/Y ramp with Shanghai, where we started with learnings from Fremont and ramp[ed] really quickly”. And its history suggests we should not expect Giga Texas to get the Model 2 recipe right in just a few months, allowing Tesla to press go in Mexico.
“It is important to emphasise that Model 3 production was three years of hell — I have said it before, some of the worst years of my life, frankly,” says Musk. “Model Y was somewhat of a variant on Model 3, so a much easier situation.
“And then we were able to do slightly improved versions or, in some cases, significantly improved versions of the Model Y production line in Shanghai and Berlin. The right [and] sensible way to go about things is to figure out the core technology of the manufacturing line and then replicate it with improvements throughout the world,” the Tesla chief concludes.
So that suggests getting things right on Model 2 in Texas could take years, rather than months. Even assuming Musk hits his late 2025 target for first cars of the line — on which, given Tesla’s track record, its CEO is more than justified in ribbing himself about his optimism — if the three years of learning on Model 3/Y are repeated, that could take us to late 2028 to even greenlight the Mexican plant.
Tesla has built its recent gigafactories in slightly less than two years. But that would still likely take us into the second half of 2030 before the Nuevo Leon plant was ready to enter service.
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