Ever since Tesla moved its headquarters to Texas and started producing cars at its factory near Austin, it has added a number of suppliers in the Mexican state of Nuevo Leon. While that state is quite large, it has only a nine-mile long border with Texas and just one border crossing.
Ivan Rivas, the economic minister for Nuevo Leon, says his state is rapidly becoming a hub for electromobility. He anticipates that up to 7% of new investment in the state this year will come from EV companies. Unbeknownst to most of us, Tesla sources parts from 6 companies that have factories located in Nuevo Leon — Taiwanese companies EnFlex and Quanta Computer, French firm Faurecia, Germany’s ZF Friedrichshafen, and APG Mexico.
To get all those supplies where they need to go on time can be a daunting task. Nuevo Leon wants to ease congestion at the border for local companies doing business with companies in the US, especially Tesla, including by adding dedicated lanes for their business. Wait times for crossing the border crossing between Texas and Nuevo Leon can be as long as 25 minutes during rush hour. Using the new dedicated lane, Tesla suppliers can get across the border in less than 10 minutes.
The Mexican state is home to at least six suppliers for Tesla, up from zero companies tied to the electric-vehicle sector before 2021, Ivan Rivas said.
He expects between 5% and 7% of the investment in the state this year to come from the EV industry pic.twitter.com/t2yXsnAvZV
— Bloomberg Green (@climate) July 21, 2022
Ivan Rivas tells Bloomberg, “It was a simple incentive. What we want is a crossing that’s much more expedited and efficient. And maybe there will be a lane for other companies in the future like there is for Tesla.” Rivas expects Tesla may add more suppliers in Nuevo Leon. The other side of the coin is that more companies may choose to locate there if they can benefit from the state’s expedited border crossing policies.
Politics can play an important role in business decisions that involve international commerce. CATL is reported to be considering a new $5 billion battery factory in Mexico. It appears CATL wants to avoid any border crossings that will subject its shipments to the whims of governor Greg Abbott, who can go full Chris Christie at any time for any reason or for no reason at all.
Supply chain management has become a critical factor in the global business community thanks to the ravages of the Covid-19 pandemic. A dedicated lane at a border crossing may seem like a small thing, but it’s little things like that that can have an outsized impact on business decisions. It may be a “simple incentive,” but it’s an important one as Tesla and others continue to put their supply chain decisions under a microscope.
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