Two Chinese suppliers for Tesla will invest nearly a billion dollars in the northern Mexican state of Nuevo Leon, where the automaker is planning a new factory. The investments were announced by state Governor Samuel Garcia, who is seeking to leverage Mexico’s “nearshoring” trend that has attracted multibillion-dollar investments from overseas manufacturers. The millennial-generation governor is also making the first steps toward a centrist independent presidential bid, a move that could split opposition to the ruling leftist party.
During a trip to Shanghai on Wednesday, Garcia announced the two planned investments from China-based companies that produce components for electric cars. The investment from Ningbo Tuopu Group, which produces automotive shock absorption products and other parts, will total $700 million. The other company to invest in is Shenzhen H&T Intelligent Control Co., which manufactures lidar (light detection and ranging) technology. A Nuevo Leon representative said the investment by the Shenzhen-based firm will total $260 million.
Both firms will be among the suppliers for Tesla’s new factory, which is expected to start production this summer in Salinas, Victoria, outside Monterrey. Tesla executives have told suppliers they need to speed up their efforts to build the new plant to meet an expected demand for the Model Y SUV. Otherwise, suppliers could lose orders worth hundreds of millions of dollars.
A combination of factors drives the interest of Chinese manufacturers in Mexico. The rising tariffs imposed by President Donald Trump’s administration, disruptions to global supply chains caused by the pandemic, and geopolitical tensions between the United States and China have all likely increased incentives for these companies to establish factories closer to their customers. The US-Mexico-Canada trade pact, which replaced NAFTA in July 2020, has also added to the momentum of Mexico’s “nearshoring” phenomenon since it gives companies greater flexibility to adjust tariffs and shipping routes based on changing conditions.
In addition to investing in production facilities, these companies are creating thousands of jobs in Nuevo Leon. For example, LGMG executive directors say the company’s plant in the municipality of Marin will employ 1,400 people. The sustainable economic development minister for Guanajuato, Ramon Alfaro Gomez, says that a Chinese firm still needs to name it is building a facility in his province to manufacture energy storage systems for the corporate and housing sectors.
The investments by these companies will help Nuevo Leon bolster its position as an international technology hub. Last year, according to a report by Mexico’s Economy Ministry, the state received more than $29 billion in foreign direct investment, or FDI, from Asia. About 60% of that investment went to five states, including Nuevo Leon. During the first half of this year, FDI from China to Mexico reached nearly $500 million, an increase of more than 100 percent over the same period in 2022. The bulk of the FDI comes from Chinese technology companies looking to tap into the growing market for intelligent vehicles, electric power grids, and other infrastructure projects.
