Tesla, Inc.’s TSLA battery supplier Contemporary Ameprex Technology Co. Ltd. (CATL) has set its sights on constructing a manufacturing plant in Mexico at a project cost of $5 billion, Bloomberg reported on Monday.
What Happened: The Chinese company is considering two locations – Ciudad Juarez in Chihuahua and Saltillo in Coahuila, the report said, citing people familiar with the matter. Both the locations are close to Texas, where Tesla has one of its newest Gigafactories.
Ciudad Juarez could be a relatively more attractive option, given its proximity to the San Jeronimo-Santa Teresa port of entry into the U.S. state of New Mexico, Bloomberg said. This would provide CATL a “route around the border crossings of Texas,” it added.
The Chinese company also supplies electric vehicle batteries to Ford Motor Co F.
CATL, the world’s largest battery supplier, is also toying with the idea of splitting the investment across two locations – one in Mexico and another in the U.S. It could decide to make battery cells in Mexico and then ship them to Kentucky for assembling into battery packs to circumvent trade restrictions.
Why It’s Important: The battery manufacturing industry is concentrated in Asia, with CATL, South Korea’s LG Energy Solutions, and Warren Buffett-backed BYD Company Limited BYDDY commanding a little over 60% of the market.
Given the global EV push, these companies have deemed it fit to move their manufacturing plants closer to their customers to serve them well. The standoff between the U.S. and China has also served as a factor, as a plant located in the U.S. or North America promises minimal disruptions. However, the U.S. government’s decision to localize production could serve as a dampener.
Last week, reports said Japanese battery maker Panasonic Holdings Corporation PCRFY signed an agreement to set up a plant in the state of Kansas.
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