Tesla's Chinese Suppliers Rush to Settle in Mexico to Support New Gigafactory

Image: Tesla

Tesla's Chinese suppliers are rushing to settle in Mexico to support the new Gigafactory. They intend to take advantage of Tesla's invitation to benefit from cooperation with the company.

Chinese auto parts makers are rushing to build factories in Mexico to be able to supply parts to Tesla's new Gigafactory. At least seven mainland-listed companies have already announced their expansion plans in Mexico, according to the South China Morning Post. The move comes after the Texas-based manufacturer urged Chinese companies to set up a business in Mexico to supply the new factory.

At least three executives of Chinese auto parts companies told the publication that Tesla had invited them to build factories in Mexico. However, according to industry officials, dozens of Chinese automotive supply chain companies relying on the mainland's electric vehicle (EV) design and manufacturing capacity will follow Tesla's lead and localize their production to Mexico.

“It is a win-win scenario,” said Peter Chen, an engineer with car parts maker ZF TRW in Shanghai. “Tesla needs Chinese suppliers to support its running of the Mexican Gigafactory, while Chinese car-part makers have been looking to tap overseas markets due to overcapacity worries at home.”

Ningbo Xusheng Group, which makes aluminum alloy parts, Zhejiang Sanhua Intelligent Controls, a manufacturer of heat control components, and Tuopu Group, which makes chassis, are among the Tesla partners that will be settling in Mexico.

At the end of March, Xusheng said it would spend $276 million to build a production line in the country. In June, Sanhua announced a factory in Mexico with an annual capacity of 8 million heat control systems, worth $146.2 million. Tuopu has allocated $200 million to build a plant in Mexico.

Tesla has said its Giga Mexico will have a capacity of 1 million units per year. It is expected to be put into operation in the second half of 2024.

“Tesla’s success story in China benefits not only the US carmaker but also its Chinese vendors,” said Chen Jinzhu, chief executive of consultancy firm Shanghai Mingliang Auto Service. “China’s prowess in EV will result in more outbound moves by supply-chain firms in the coming five years,” he added.

© 2023, Eva Fox | Tesmanian. All rights reserved.

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