Chinese Car Parts Makers Rush to Mexico to Supply Tesla's New Gigafactory
Updated: Dec 27, 2023
[Edited] Chinese car component manufacturers are swiftly establishing production plants in Mexico to supply parts to Tesla's new factory, known as "Gigafactory 6."
At least seven mainland-listed companies have already announced their plans to expand in Mexico following the construction of Tesla's Gigafactory near Monterrey.
This move comes as Tesla invited Chinese car component firms to build factories in Mexico, signaling a potential trend of Chinese automotive supply-chain vendors localizing their production in Mexico.
The decision to expand to Mexico is seen as a win-win scenario for both Tesla and Chinese car-part makers. Tesla requires Chinese suppliers to support the operation of its Mexican Gigafactory, while Chinese car-part manufacturers are seeking to tap into overseas markets due to concerns of overcapacity at home. This collaboration allows Tesla to leverage China's design and manufacturing capabilities in the electric vehicle (EV) sector while providing Chinese vendors with new opportunities abroad.
Among the Chinese companies venturing into Mexico are Ningbo Xusheng Group, Zhejiang Sanhua Intelligent Controls, and Tuopu Group. Ningbo Xusheng Group plans to invest US$276 million in building a production line in Mexico, while Zhejiang Sanhua Intelligent Controls has announced a plant with an annual capacity of 8 million heat control systems, costing 1.05 billion yuan (US$146.2 million). Tuopu Group has allocated US$200 million to establish a factory in Mexico.
Tesla's Gigafactory in Mexico is expected to have a capacity of 1 million units per year and is set to become operational in the second half of 2024. This expansion follows the success of Tesla's Shanghai Gigafactory, which has become the company's largest production hub worldwide. The Shanghai facility produced 710,000 vehicles in 2022, accounting for more than half of Tesla's total output.
China's dominance in the global EV supply chain is evident, with Chinese vendors already supplying nearly half of the world's vehicle parts. Chinese companies, such as Contemporary Amperex Technology Limited (CATL) and BYD, lead in battery production for electric cars. With China's expertise in the EV sector, UBS analyst Paul Gong predicts a 35% increase in electric car sales in China this year, reaching 8.8 million units.
As Tesla expands its operations in Mexico and continues to collaborate with Chinese car component manufacturers, the global EV market is set to witness further growth and innovation. The partnership between Tesla and Chinese vendors highlights the importance of international collaboration in advancing the electric vehicle industry.
Chinese car component makers are establishing production plants in Mexico to supply parts to Tesla's Gigafactory 6.
Several mainland-listed companies have announced plans to expand in Mexico following Tesla's construction of the Gigafactory.
Chinese car component firms have been invited by Tesla to build factories in Mexico, signaling a trend of localization.