How Donald Trump's Mexico tariffs may hurt Elon Musk's Tesla
Tesla CEO Elon Musk had put the plans for a new gigafactory in Mexico on hold in 2023, pending the outcome of the US presidential election. Now, Musk's fears have been confirmed with Donald Trump announcing a 25% tariff on products from Mexico. The president-elect has promised to impose these tariffs on all goods from the country, and plans to sign an executive order on his first day in office. So, what does it mean for Tesla? Let's see.
Tesla's ambitious plans for Mexico gigafactory
In 2023, Musk announced plans to set up a gigafactory in Nuevo Leon, a northern border state of Mexico. The proposed factory, worth over $5 billion, was pitched as the "biggest electric vehicle plant in the world." Musk had said this plant would complement the production of all other Tesla factories. The Giga Mexico project would be one of the largest investments announced in Mexico in recent years. Sadly, now its on hold.
Potential impact on EV industry and Tesla's business
A shift in Tesla's gigafactory plans could impact the growth of the EV industry, which has been bolstered by the Inflation Reduction Act (IRA) in the US. Tesla has reaped the benefits of manufacturing and investment tax credits through the IRA. However, Musk has warned that any cuts or reversals to this act could be detrimental not just for Tesla but also its competitors.
Musk's stance on investing in Mexico amid tariffs
During a Tesla earnings call in July, Musk had expressed his reservations about investing heavily in Mexico due to Trump's proposed tariffs on vehicles produced there. He had said, "We kind of need to see where things play out politically." If the gigafactory plan materialises somehow, locals would get more jobs, and the EV maker would have a source of cheaper labor to build its cars. Now, how Tesla navigates Trump's Mexico policy remains to be seen.
