In March 2023, Tesla announced ambitious plans to build a five-billion-dollar Gigafactory in Santa Catarina, near Monterrey, Mexico. The factory is expected to significantly reduce production costs and strengthen Tesla’s presence in the North American market. Specifically, the Model 3 and Model Y based on the "Next Generation Vehicles" platform are to be produced in Mexico.

Despite initial enthusiasm, delays and uncertainties arose in the project, contributing to its current suspension. Tesla is currently focusing more on consolidating investments in Texas amid global economic challenges. However, another decisive factor is the uncertainty regarding political developments in the USA.

Tesla CEO Elon Musk stated that the decision depends on the outcome of the upcoming presidential elections in the USA.

The strategic pause underscores the intricate connection between political developments and economic decisions in the automotive industry. With Trump's looming tariffs, the profitability of Tesla's Mexican operations remains uncertain, leading to a cautious approach in a highly competitive market. For personal reasons, Musk is likely to favor a Trump election victory, as he openly shows his support for the Republican, despite Trump's policies potentially eliminating essential incentives for the purchase of electric vehicles.

The postponement of the Mexico plans comes at a time when Tesla is struggling with declining profits and delays in launching new products, such as the Robotaxi. Analysts identify an identity crisis for the once-hyped company, whose shares are far from their record highs of fall 2021. Over the past twelve months, Tesla shares, which can currently be bought for $207.67, have lost 18.28 percent in value. In the same period, the US tech index NASDAQ 100, in which Tesla is prominently represented, gained 19.97 percent (as of the closing price on August 2, 2024).

While Tesla pauses its expansion in Mexico, other automakers, particularly from China, are advancing their plans. Companies like BYD and Dongfeng are establishing branches in Mexico to take advantage of nearshoring. Musk views this development very critically. In a conference call following the financial results, Tesla's CEO warned of the threat posed by Chinese electric car manufacturers like BYD. Musk is calling for trade barriers, without which "most other car companies in the world would be practically ruined.

The Alliance for American Manufacturing (AAM) supports these concerns and emphasizes that Chinese automakers are using Mexico as a backdoor to enter the US market duty-free. This poses a significant threat to the US auto industry. The AAM recommends increasing tariffs on Chinese auto imports and tightening the USMCA agreement to prevent unfair competition.

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