Musk Brings Chinese Suppliers to Mexico to Avoid U.S. Restrictions

According to a report by Bloomberg on the 14th (local time), Elon Musk, CEO of Tesla, is causing concerns for the U.S. government by inviting Chinese auto parts manufacturers to Mexico.

According to the report, Musk is building a new Monterrey, Nuevo Leon, Mexico factory. At Musk’s request, many sources reported that Chinese auto parts manufacturers are rapidly gathering in the vicinity of the process. These Chinese companies are known to push for new factories on the outskirts of Monterrey.

Musk plans to create a copy of the local supply chain procured for Tesla’s Shanghai factory in China in Mexico; therefore, he called these Chinese companies to Mexico.

Accordingly, these Chinese companies are expected to supply parts to Tesla’s new electric car factory under construction in Monterrey.

Tesla declined to comment on this.

Bloomberg reported that such a movement is causing concerns for American electric car manufacturers and U.S. government officials. Electric cars assembled in Mexico can receive a maximum of $7,500 in U.S. consumer tax deductions under the U.S. Inflation Reduction Act (IRA).

With relatively low labor costs and accessibility to the U.S. market, Mexico is gaining attention as a production base for electric vehicles. According to the National Auto Parts Industry Association (INA) of Mexico, Chinese auto parts manufactured in Mexico and exported to the United States were estimated to be worth $1.1 billion last year.

Last year, 33 Chinese auto parts companies were registered in Mexico, and parts from 18 were exported to the United States. Many Chinese companies especially turned their eyes to Mexico during the “trade war” that started during the tenure of former President Donald Trump.