Why Tesla's plan for a factory in Mexico is a 'genius move' for making a $25,000 car
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- Building in Mexico could be the key to the $25,000 Tesla.
- Even without unveiling the affordable model, one manufacturing expert is convinced Tesla has the chops to pull it off.
- The affordable Tesla will be unveiled "at a later date," Elon Musk has said.
Elon Musk's plan to build another factory in Mexico will be key in Tesla's bid to provide the masses with a $25,000 car, according to automotive manufacturing expert Sandy Munro.
Tesla shared plans for a new factory in Mexico that would supplement existing Tesla assembly at the company's investor day earlier this month
"The Mexican plant is a genius move," Munro, a manufacturing expert known for his vehicle teardowns, said in a YouTube video posted in March. "We've done studies that found in some places – and some situations – Mexico is cheaper than China."
An assembly plant in Mexico, where workers are typically paid less than in the US, makes the most sense for achieving a $25,000 Tesla, Munro said, something that's long been a goal of Musk.
"Why go to China if you can get to Mexico?" he said.
Many car companies have increased their manufacturing presence in Mexico in the last two decades in pursuit of lower labor costs, as well as benefits of free trade agreements in North America, and lower shipping costs than overseas manufacturing operations. Some of the industry's most profitable vehicles are built in Mexico, including some General Motors pickup trucks and heavy-duty Ram pickups.
Musk first teased the idea of a sub-$30,000 Tesla in 2020. At the time, he said the affordable price point would be achieved through a 50% reduction in cost for battery and cell manufacturing. That car is supposed to come out this year if the company is on track with those original plans.
Investors expected to see a preview of this new, affordable Tesla at the company's March 1 Investor Day, but were disappointed when executives shared manufacturing cost-savings efforts but failed to unveil the new model that would benefit from these changes.
How Tesla plans to cut manufacturing costs
Tesla's lead designer and vice president of vehicle engineering shared a series of cost-saving manufacturing changes the electric-vehicle maker has in store for the year ahead at the company's investor day.
These plans include rethinking the assembly line in a way that allows more people and robots to work on a vehicle at the same time and reducing factory footprint by more than 40%. Overall, Tesla is targeting a 50% reduction in manufacturing costs.
It's all part of Musk and Tesla's plan to sell more than 20 million cars by the end of the decade – a target that some have said is too lofty and hinges on major changes in battery tech.
But Munro said he isn't ready to bet against Musk just yet
"Every time someone opens their mouth and says 'that can't happen,' Elon shows up" to prove them wrong, he said. "If you want to be a naysayer, go ahead … At the end of the day you're always going to lose especially if you're betting against Elon Musk."