Tesla’s CEO Elon Musk said his company will pause development of a $5 billion gigafactory in Santa Catarina, Nuevo León, in Mexico until after the U.S. presidential elections.

Tesla picked the northern industrial state for cost reasons, including workforce availability and the presence of key parts suppliers. The decision impacts Tesla’s ability to produce lower-cost electric vehicles (EVs) for export to the U.S. market.

“We currently are paused on Giga Mexico. I think we need to see just where things stand after the election,” Musk said July 24 during the company’s second quarter 2024 webcast in response to an analyst’s question.

“Trump has said that he will put heavy tariffs on vehicles produced in Mexico. So, it doesn't make sense to invest a lot in Mexico if that is going to be the case. So, we kind of need to see where the things play out politically,” Musk said.

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Mexico’s geographic location and its role within the United States-Mexico-Canada Agreement (USMCA)—which went into effect July 1, 2020, and supplanted the North America Free Trade Agreement (NAFTA)—offers Mexican producers of goods and services direct access to the U.S. and Canada.

This has boosted Mexico’s nearshoring appeal and led to increasingly higher inward foreign direct investment (FDI) flows over the last 18 years.

Mexico’s outgoing President Andrés Manuel López Obrador said Trump’s statements were a plan to gain votes ahead of U.S. elections later this year.

“It’s much cheaper to produce cars in Mexico than in the U.S.,” AMLO said July 24 during his daily press conference with the media.