New Tesla Gigafactory in Mexico may be for cheaper Model 2 production with US$10 billion investment

Elon Musk may be gearing to announce a new Tesla Gigafactory location in Nuevo León soon, reported Bloomberg, and today a local publication confirmed the rumor, fleshing it out a bit more. Not only is Tesla preparing to out a Gigafactory with a location in Monterrey's suburb of Santa Catarina (a seven-hour drive from Giga Texas), but it also has big plans for the Mexican plant's expansion going forward.

With an initial investment of up to US$1 billion, the Gigafactory in Mexico is meant to help with the production of components for the existing Tesla models that will be assembled in Giga Texas at first, like the Cybertruck or the Semi. Later on, however, tip insiders privy to the negotiations, the Mexican Gigafactory investment may be expanded to over US$10 billion and used for the production of a more affordable than the current models Tesla car:

The investment, including initial phases and future expansions, would exceed 10 billion dollars. It will consist in investment in the initial phase for various components for existing models, and in future phases it would be a new model with a lower cost than the current ones.

That mysterious new car from Tesla could very well be the cheaper mass market Model 2 which is slowly moving from a vaporware status to a stage of actual consideration in Tesla's future development plans. Back in the fall, Tesla's chief of investor relations said that the automaker would have to develop an affordable Model 2 in the span of its current 5-year plan, and before the launch of its rumored Robotaxi autonomous vehicle service.

Later on, during Tesla's last earnings call, Elon Musk reiterated that a cheap Model 2 is coming, and said that Tesla will be aiming to cut its production costs in half compared to the Model 3. Model 2 "will be smaller, to be clear," he added, but it is ultimately expected to sell in larger quantities than "all of Tesla’s other vehicles combined." While it isn't clear whether halving the manufacturing costs of the Model 2 will result in launching it at half the price of a Model 3, it will certainly become the entry level Tesla car and the preparations for its mass production might be what lies behind the newest Giga Mexico project.

There, Tesla would be able to apply all the production efficiency lessons it learned while building or expanding its previous Gigafactories. Coupled with the lower cost of labor and proximity to the US, as well as with any federal or state incentives, Tesla could manage to achieve the economies of scale needed to arrive at a sub-US$30,000 retail price of the Model 2.

"Everything seems to indicate that the land for Musk has already been acquired, what is not known is whether it was the State Government itself or the businessman," tipped a local investment advisor, while they add that the land purchases aren't going through real estate brokers, but the entities are rather buying directly. "I've had around 10 Tesla suppliers who have come looking for 'site' options to settle here," informed another source.

Elon Musk was reportedly in Nuevo León twice this year to scour possible plant locations, and the same publication managed to obtain pictures of Tesla's CEO together with the State Governor's wife then, as well as with the Undersecretary of Investment Emmanuel Loo, a former Austin resident, who is pegged to be the main catalyst of the Giga Mexico factory project.

Together with Marco González, the State Secretary of Regional and Agricultural Development, they have also been instrumental in creating the dedicated border crossing lanes for Tesla's part suppliers in Mexico which popped up over the summer.

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