First Tesla Model 2 to be made in Texas like the Cybertruck before US$15 billion mass production investment in Mexico

Tesla hatchback design drawing (image: Tesla)
Tesla hatchback design drawing (image: Tesla)

Tesla and its Chinese suppliers will be tripling the initially teased US$5 billion investment in the production of its cheapest Model 2 EV. Building the Gigafactory in Mexico may take two years, though, so Tesla will assemble it in Texas first.

According to the Governor of the Mexican state of Nuevo León which will house Tesla’s largest Gigafactory,  “just Tesla and its suppliers will generate an investment of $15 billion in two years.” This is triple the initial US$5 billion amount that local officials said Tesla will invest in the project. Giga Mexico is expected to build Tesla’s first mass market electric vehicle, tentatively dubbed the Model 2, and could churn out 2 million cars annually when fully operational.

That moment, however, apparently will only come in 2026. Initially, Tesla wanted to replicate the breakneck pace of construction that allowed it to build the Shanghai Gigafactory in less than a year. It even demanded that its Chinese suppliers relocate to Mexico or branch out there pronto, but recently put those plans on standby.

Due to reported permit and workforce roadblocks, Tesla’s Gigafactory in Mexico is now facing delays and may take double the time to build than the Shanghai plant. When operational, however, Giga Mexico and its satellite factories by Chinese suppliers would be a giant US$15 billion investment in a mass Model 2 production. Speaking at a local event, Governor Samuel García advised that Nuevo León would be making significant infrastructure upgrades such as highways and waterworks in order to accommodate Tesla’s “enormous” investment.

First Tesla Model 2 units to be made at Giga Texas

Instead of waiting for the Mexican factory, however, Tesla reportedly decided to develop and launch the first Model 2 Release Candidates in Giga Texas, just as it did with the Cybertruck. According to the Walter Isaacson’s biography of Elon Musk that got released today, he only got sold on the Model 2 when he saw the futuristic design. Previously, he wanted Tesla to go and build a robotaxi as its first mass market EV, rather than produce a cheap and compact vehicle that will still come with steering wheel and pedals.

Tesla’s design head Franz von Holzhausen managed to convince him that the company can build both the Model 2 and the robotaxi on its upcoming next-gen EV platform at the same assembly lines. Those lines, however, are now being built at the Gigafactory in Austin so that the development and production are as close to Tesla’s top engineers as possible, according to Musk’s biography:

The new mass-market vehicle, both with a steering wheel and as a Robotaxi, became known as “the next generation platform.” Musk initially decided that Tesla would build a new factory in northern Mexico, four hundred miles south of Austin, designed from the ground up to build such cars. It would use a completely new manufacturing method that was highly automated. But a problem soon arose in his mind: Не had always believed that Tesla’s design engineers needed to be located right next to the assembly line, rather than allowing manufacturing to be done at a remote location.

That way, engineers could get instant feedback on how to design innovations that would both improve the car and make it easier to manufacture. This was particularly true for a completely new car and manufacturing process. But he realized he would have trouble getting his top engineers to relocate to the new factory. “Tesla engineering will need to be on the line to make it successful, and getting everyone to move to Mexico is never going to happen,” he told me. 

So in May 2023, he decided to change the initial build location for the next- generation cars and Robotaxis to Austin, where his own workspace and that of his top engineers would be right next to the new high-speed ultra-automated assembly line. Throughout the summer of 2023, he spent hours each week working with his team to design each station on the line, finding ways to shave milliseconds off each step and process.

Get Elon Musk’s biography by Walter Isaacson on Amazon

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