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Elon MuskeveviraevEVira EVbyd evYour browser does not support the element. likes to think big, from giant rockets to blockbuster pay packets and massive, if misguided, investments in social media. In Mexico’s case it was an investment, announced in March 2023, in “the biggest plant in the world”. Tesla’s boss said that he would spend $5bn to build a “gigafactory” in Nuevo León, a state bordering the United States, that on completion in 2026 would churn out more electric vehicles (s) than any of his existing facilities in America, China and Germany. Almost two years later, however, Tesla has yet to break ground. Why has the mercurial Mr Musk’s interest cooled?Many of the world’s biggest carmakers have set up shop in Mexico. Its attractions include cheap labour, a well-established supply chain and a large home market—sales hit almost 1.5m vehicles in 2024. Free-trade agreements, not only with America but with 50 other countries, make it a base for exports. The country has also had an edge in the switch to battery power. America’s Inflation Reduction Act () makes free-trade partners such as Mexico eligible for subsidies for s made with raw materials sourced on their soil. And even though it nationalised its reserves in 2022, Mexico has plenty of lithium, which is used to make batteries.Yet Donald Trump’s election victory puts the in jeopardy, dimming the prospects of Ford and General Motors, which are making s in Mexican plants, and Mr Musk’s gigafactory. The billionaire had already judged that politics might be an impediment. In July 2024 he said that he was “pausing” Tesla’s plans. Were Mr Trump to win the presidential election it would not “make sense” to build a factory in Mexico, he said. Mr Trump has threatened tariffs of 100-200% on cars made south of the border, in part to encourage firms to bring production back to America and also to head off Chinese carmakers. and others might have hoped that building factories in Mexico would have helped them sidestep hefty tariffs on Chinese imports that have, in effect, banned their cars from America.Mr Musk has since become the president-elect’s bosom buddy. Even so it is uncertain that he would be able to persuade Mr Trump, a keen fan of tariffs, to drop his plans. But another reason why Mr Musk is in no rush to make cars in Mexico is a change in strategy. Tesla is now betting its future on Robotaxis rather than the Model 2, a cheaper mass-market that would undoubtedly have occupied a factory with capacity to make perhaps 1m cars a year.Mexican officials hope that Tesla will eventually revive its scheme. Marcelo Ebrard, Mexico’s economy secretary, has said he is urgently seeking a meeting with Mr Musk to see how the government can help. “Mexico cannot afford to lose Tesla’s investment,” says Antonio Ocaranza, a consultant, as it would be a powerful showcase to attract other foreign companies.Mexico needs all the help it can get. Since Mr Trump started a trade war with China during his first term, it has sought to position itself as an alternative site for manufacturers beyond carmakers. Yet shortages of water, energy and workers with the right skills are a challenge. Mr Musk’s changes of mind are one thing. A failure to fix these basic problems means that Mexico will be more exposed to the even mightier whims of Mr Trump for four long years.
