Elon Musk delays Mexico gigafactory plans until after US election

Musk cited Trump's campaign promises to impose tariffs on cars produced in Mexico.

Billionaire and Tesla CEO Elon Musk announced Tuesday that plans to build a "gigafactory" or electric car assembly plant in northern Mexico will be put on hold until after the US presidential election in November.

Musk told analysts and the media during Tesla's second-quarter earnings call that presidential candidate Donald Trump's pledge to impose substantial tariffs on cars produced in Mexico could deter plans to build the gigafactory and the billions in investment it entailed.

Although agreements to build the plant in Santa Catarina, Nuevo Leon in northeastern Mexico were mired in doubt, given the drought plaguing the region and the lack of infrastructure, Musk confirmed the construction of 'Giga Mexico' in March 2023 to the excitement of local and federal authorities.

The announcement was hailed by President Andres Manuel Lopez Obrador, who reportedly spoke with Musk over the phone to discuss the virtues of Mexican workers. Yet the carmaker did not provide details on the construction process or dates.

However, the envisioned plant's construction could potentially end, given Trump's tariff pledge.

"Trump has said that he will put heavy tariffs on vehicles produced in Mexico, so it doesn't make sense to invest a lot in Mexico if that is going to be the case. So we will kind of need to see how things play out politically," said Musk.

Although Trump hasn't publicly disclosed his economic policy regarding US cars produced in Mexico, he has promised to impose a 100% tariff on Chinese vehicles made in Mexico.

The second-time candidate for the US presidency has promised tariffs to boost domestic production in the United States, a move to counteract the cheap labor and extensive working hours found in Mexican production, which is highly profitable for foreign producers.