Tesla Delays Construction of Mexican Assembly Plant Due to High Interest Rates, Says Elon Musk
In a recent call with analysts and the media, Elon Musk, CEO of Tesla, announced that the construction of the company’s assembly plant in Mexico will be delayed until interest rates fall. Musk expressed concerns about high interest rates and the potential impact they could have on Tesla, citing the 2009 crisis that nearly wiped out manufacturers like General Motors (GM).
Musk emphasized that uncertainty, including the outbreak of war conflicts like those in Ukraine and Gaza, has also contributed to the decision to postpone the construction plans. “We want to understand how the global economy is doing before going into overdrive with the Mexico plant. I am concerned about the high-interest scenario we are in,” Musk stated.
Explaining the rationale behind the delay, Musk highlighted the importance of monthly payments in vehicle purchases. As interest rates rise, the proportion of interest in those payments naturally increases, affecting the affordability for customers.
Despite the delay, Musk assured that Tesla still intends to build an assembly plant in Mexico, for which they already have a location. “It’s a matter of time,” he said, adding that “interest rates have to go down” before proceeding with the construction.
Referring to the scars of the 2009 crisis when General Motors and Chrysler almost faced bankruptcy, Musk expressed caution about moving full speed ahead in an uncertain environment. “It’s etched in my mind. So I’m not going to go full speed in the direction of uncertainty,” he concluded.
Tesla reported a 20.3% decline in net profits for the first nine months of 2023, compared to the same period in 2022. The company attributed the decline to high production costs at its new assembly plants.
While Tesla plans to begin the next phase of construction in the coming year, the timeline for completing the Mexican assembly plant remains uncertain. Musk stated that knowing the future interest rates would enable him to provide a more accurate timeframe for the project.
Investors and industry experts will be closely monitoring the developments surrounding Tesla’s construction plans in Mexico and how interest rate fluctuations may impact the company’s growth strategy.