Original link: https://www.latepost.com/news/dj_detail?id=1721
“LatePost” exclusively learned that the latest plan for Tesla’s Nuevo Leon plant in Mexico to be completed and put into production is in the first quarter of 2025, and Tesla has synchronized the new schedule to component suppliers, which is later than the market expected. 1-2 quarters. Tesla had previously underestimated the difficulty of building a factory in Mexico, people close to Tesla’s suppliers said.
Based on the information from several Chinese suppliers, they received a clear request from Tesla: If they fail to complete localized production in Mexico before 2025, it will not only be difficult to obtain orders from new Mexican factories, but may also lose the original export to Tesla. Pull orders from American factories.
Tesla did not provide additional assistance to suppliers going to Mexico to build factories, nor did it promise to give orders to Chinese companies overseas. However, a supplier said that for selected partners, Tesla’s purchase price in Mexico is 18%-20% higher than its order in China. The supplier calculated that the production cost of the same component in Mexico is about 15% higher than that in China, and building a factory in Mexico can increase the gross profit margin by about 3 points.
Tesla’s Mexico plant will have an annual production capacity of 2 million vehicles, making it the world’s largest car factory with the largest design capacity. The Mexican media “Reforma” stated that the investment in the factory reached 10 billion U.S. dollars, planned to employ about 7,000 workers, and covered an area of 25,000 mu.
This is an opportunity that Chinese auto suppliers who have entered the special chain or want to enter the special chain do not want to miss. With the help of Tesla’s new factory, more companies in China’s auto industry chain are aiming to make money overseas.
Go to Mexico to rebuild the Shanghai factory
Tesla CEO Musk stubbornly believes that the only reason that hinders consumers from buying Tesla is that Tesla cars are not cheap enough. The main way for Tesla to grow is to manufacture more cars with lower cost and higher efficiency. Competitive cars.
Before the Mexican factory, the Shanghai factory was Tesla’s most efficient factory, and it produced the most and cheapest Tesla vehicles. The Shanghai factory produced 710,000 vehicles last year, accounting for 54% of Tesla’s global production. You can buy a Tesla Model 3 for only 231,900 yuan in China, 36,990 U.S. dollars (about 266,900 yuan) in the United States, and 39,900 euros (about 314,000 yuan) in Germany .
Musk attributed the success of the Shanghai factory to the help of the Chinese government, China’s hardworking and cheap labor costs, and a localized supply chain. 95% of the Model 3 parts manufactured in the Shanghai factory are produced in China.
Except for a small number of high-end chips such as self-driving chips, Tesla can buy all parts in China. The Yangtze River Delta region gathers more than 50% of China’s power battery, motor, battery control system and automotive electronics production capacity, and most of the auto parts factories are within 300 kilometers of the Shanghai factory. It takes less than 6 hours for the battery produced by Ningde Times to go off the assembly line in Liyang, Jiangsu Province and install it on the car. The straight-line distance from Bosch’s brake system factory in Suzhou to the Shanghai factory is less than 150 kilometers. This allows Tesla to produce cars with extremely low parts inventory, and the container trucks at the factory gate and on the road are Tesla’s warehouses.
Starting in the second half of last year, Tesla plans to move this supply chain to Nuevo Leon, Mexico.
The planned annual production capacity of Tesla’s new Mexico plant is 2 million vehicles, which is 2.85 times the capacity of the Shanghai plant last year (700,000 vehicles). Tesla will apply the latest manufacturing technology at the Mexican factory to manufacture two new models and some auto parts priced at about 25,000 US dollars (about 175,000 yuan), which is Tesla’s cheapest so far. It will help Tesla achieve the next stage of large-scale expansion and is an important step for Tesla to achieve its annual production target of 20 million vehicles in 2030.
The reason why this important new factory landed in Mexico is related to the “Inflation Reduction Act” enacted by the United States last year. The bill provides a tax deduction of US$7,500 per vehicle for electric vehicles that meet the “North American Rules of Origin”, provided that more than 75% of the value of a new energy vehicle’s components are produced in North America, namely the United States, Canada and Mexico, Vehicle assembly should be completed in North America; more than 40% of the raw materials and more than 50% of the components of the power battery should be produced in “the United States and its trading partner countries”, which includes more than 20 countries such as Mexico, Canada and Japan.
Tesla’s Mexican factory is more than 200 kilometers away from the US-Mexico border and 600 kilometers away from Tesla’s Texas factory. The two factories will share part of the supply chain.
A number of Tesla suppliers told “LatePost” that Tesla began negotiating with Chinese suppliers last year for supply chain orders for Mexican factories, provided that component suppliers must achieve localized production in Mexico. U.S. automakers such as General Motors and Ford have also made the same request to Chinese suppliers who want to supply their North American factories.
According to incomplete statistics from “LatePost”, more than 20 Tesla’s Chinese suppliers have announced plans to build factories in Mexico or have already built factories in Mexico.
It is understood that Tesla has told some of the suppliers it is already cooperating with that if it fails to achieve local production in Mexico by 2025, it may lose orders currently exported to Tesla’s California and Texas factories in the United States.
The attraction is more profit. A supplier revealed that Tesla’s purchase pricing in Mexico is 18%-20% higher than its orders in China. According to its calculations, with the increase in the cost of labor and raw materials, the production cost of the same component in Mexico is about 15% higher than that in China, and building a factory in Mexico can still increase the gross profit rate by about 3%.
Chinese companies that have not yet entered Tesla’s supply chain also want to take advantage of this opportunity to seize new business. A supplier said that Tesla did not promise all existing suppliers that they would definitely purchase: “The entire bidding process is market-oriented, and some companies that have not entered Tesla’s supply chain also plan to go to Mexico to build factories. into the Tesla supply chain.”
Tesla also needs these Chinese suppliers. Like Apple, Tesla will help suppliers improve their manufacturing technology. In the process of serving Tesla, Chinese suppliers have also developed their own supporting R&D capabilities. They not only provide standard products, but also Research and development of components and manufacturing processes are required. For example, Tesla and LK Group jointly developed a 6,000-ton integrated die-casting machine in 2019. The efficient supply chain that Tesla has spent so much energy cultivating in China cannot be replaced in a short time.
Going to Mexico is risky, but Tesla’s predictable growth is more enticing
To build a factory in Mexico, Chinese companies need challenges such as huge capital expenditure, higher labor costs, poorer infrastructure, and a very different culture.
According to a person close to the supplier, the hourly salary of Mexican manufacturing workers in Nuevo Leon is about US$4.8, which is slightly higher than China’s US$4.5. Some Chinese suppliers who have built factories in Mexico and trained workers believe that Mexican manufacturing The proficiency of industrial workers is not as good as in China, and they have high overtime pay.
China’s automobile manufacturing industry generally works in two to three shifts. In three shifts, each person works 8 hours a day, and in two shifts, each person works 12 hours a day. The company needs to pay 4 hours of overtime. However, in Mexico, overtime pay of 200% of hourly wages is paid for 2 hours of overtime, and 300% of hourly wages for overtime of 4 hours. “Counting all kinds of subsidies and strong labor unions, the overall labor cost will be more than 10% higher than that in China.” A supplier believes that suppliers with a high automation rate are more suitable to go to Mexico.
Local transportation in Mexico also poses challenges for suppliers. According to a supplier source, during the COVID-19 pandemic, some Chinese companies that had built factories in Mexico could not find enough transport trucks, so they could only choose to send parts to the United States by air. At present, most suppliers choose to build their own logistics network after going to Mexico to build factories. The common practice in China is to find outsourced logistics suppliers.
However, most of Tesla’s Chinese suppliers still choose to build factories in Mexico. They believe that the growth of Tesla’s Mexican factory is predictable and unprecedented. Even if Tesla cannot be supplied, Mexico is still a blue ocean.
Mexico is the fourth largest producer of auto parts and the sixth largest producer of automobiles in the world. Large traditional car companies such as General Motors, Nissan, Volkswagen, and Ford all have production bases in Mexico. Mexico is still the largest importer of parts and components to the United States, accounting for more than 30% of imports. However, Mexico currently lacks a complete electric vehicle supply chain, and suppliers can find customers other than Tesla locally. The electrification, thermal management and intelligent suppliers required by electric vehicles account for only 2.2% of Mexico’s overall automotive supply chain, while China’s is 8.8%.
Most of the more than 20 Chinese auto suppliers that have factories in Mexico or plan to build factories are located in the state of Nuevo Leon, where Tesla’s Mexican factory is located, and the adjacent state of Coahuila. These two states are close to the U.S.-Mexico border, and they are the clusters of Mexico’s auto industry. Before Tesla, Kia and GM had built auto factories in these two states.
Before Tesla announced the new factory in Mexico, some Chinese auto suppliers had already gone to Mexico and had experience in operating factories locally. For example, Joyson Electronics, which produces automotive electronics, built a factory in Mexico in 2010 to supply customers such as GM. Rongtai Co., Ltd. of aluminum alloy castings built a factory in Mexico in 2017.
More companies are companies that have followed Tesla into the Mexican or North American markets this time. Some of them have overseas experience in other regions, such as Huayu Automobile, which makes car interiors, and Wencan, which makes steering systems.
However, the supplier that has the greatest impact on Tesla’s cost, the power battery company Ningde Times, has given up its plan to build a factory in Mexico. It will most likely adopt technology licensing to cooperate with Tesla in the United States, similar to the cooperation between Ningde Times and Ford. : Ningde era provides products and manufacturing technology, charges technology authorization and service fees, but does not invest in the construction of factories, and does not hold factory ownership. The joint venture plan between Ningde era and Ford is progressing slowly, and its cooperation with Tesla in North America is more uncertain.
The Mexican auto industry chain rose during the oil crisis in the 1970s, when a large number of Japanese auto and parts companies rushed to Mexico to build factories. In the current wave of new energy vehicles, another group of Chinese companies followed Tesla to build factories in Mexico. This is the best opportunity to make money globally that China’s auto supply chain has encountered so far.
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