Tesla will not build a factory in Mexico

Elon Musk's automotive company has ruled out Mexico as the site for the construction of its future assembly plant and has preferred the U.S. cities of Austin in Texas and Tulsa in the state of Oklahoma as its two potential destinations.

Tesla will not operate a factory in Mexico. Photo: Tesla
Tesla will not operate a factory in Mexico. Photo: Tesla

A few days ago the governor of the state of Guanajuato, Diego Sinhue Rodriguez Vallejo, through his official Twitter account, proposed to Musk to think about that entity as one of the probable locations.

In his message, the state executive reminded Tesla's owner that Guanajuato is home to five car assembly plants and has what it takes to host a sixth, but the idea was dropped.

Tesla's idea of assembling its vehicles in U.S. territory is based on wanting to have the opportunity to strongly cover the market on the east coast of the country.

How Tesla became the second-largest automotive company in the world

When Tesla's value in the auto market exceeded $100 billion two weeks ago, surpassing that of Germany's Volkswagen, many doubted that it could maintain that figure.

But, last Tuesday, the value of Tesla's shares shot up by more than 13%, reaching a value of over US$887 per unit and taking the company's total beyond US$150 billion.

This spectacular jump means that the company's shares have more than tripled in the last three months, surpassing the forecasts of some of the most optimistic analysts who are following in the footsteps of the electric car manufacturer.

Now Tesla has positioned itself as the second most valuable automotive company in the world, behind Japan's Toyota and ahead of Germany's Volkswagen.

Strong performance

Less than two years ago, things didn't look very promising for the car manufacturer.

The firm, which had reported losses every year since its inception, was facing a cash flow crisis amid production delays and overspending.

Doubts also abounded about the management skills of the executive director, Elon Musk, who built a reputation for making promises he could not keep.

Since then, Tesla's numbers have improved. The firm has recorded two quarters of profits and its new factory in Shanghai started production much earlier than expected.

Indications also suggest that buyer demand remains strong, despite fears of a possible slowdown.

Its new car model, the Cybertruck, attracted 200,000 orders, even after an embarrassing incident in which the car's supposedly "tough" windows were broken during a demonstration.

The company has also avoided the impact of self-inflicted errors, such as the tweets it launched in Musk in 2018, which earned it accusations of price manipulation, forcing its removal as president of the company.

"It has become very clear to investors that Tesla has a variety of long-term sustainable growth drivers that are very difficult to deny," says Rolf Bulk, an analyst with the specialist investment firm New Street Research.

Analysts at another investment products firm, Wolfe Research, acknowledged that they were "a little surprised by the magnitude" of the stock's rise, but added that "the abundance of positive aspects explains the movement.

In a memo to their clients last week, they wrote: "There may be ups and downs, but our perspective is that stocks have found a new scope.

Can these prices be sustained?

Rolf Bulk believes that the recent stock rally indicates that some of the investors who were betting against the company have been marginalized or forced to take "closed positions," a process that involves buying shares, which drives up prices.

But the investment advisory group S3 Partners, which monitors that activity, says its research shows that the recent purchase has been made by a mix of ordinary investors and large companies.

However, Tesla's shares have historically been subject to large swings.

Some observers have noted that prices could plummet again, especially in light of Tesla's new investment in a new factory in Europe and the reality of the coronavirus that has forced a temporary shutdown of production in Shanghai.

The prospect of a weak first quarter is "something that has not been fully recognized by Wall Street today," Bulk added.

What about the other car manufacturers?

Tesla delivered more than 367,500 cars last year, a 50% increase over 2018. Sales of about 500,000 units are forecast for this year, and analysts project that Tesla could reach 2 million by 2030. But its deliveries remain well below those of its rivals.

Volkswagen delivered almost 11 million vehicles last year, while Toyota - which has a market value of more than US$230 billion - sold more than nine million in the first 11 months of 2019.

But experts say that in electric car technology, Tesla continues to lead the industry. The company may well maintain that lead for longer than expected as demand for electric vehicles grows.

There is even speculation that the company's investment in batteries could position it as a supplier to other large automakers.

In a recent note to its customers, Morgan Stanley analyst Adam Jonas said that if Tesla could achieve all those results, it could reach the value at which its shares are currently being sold.

By Mexicanist