In May, Elon Musk said he would most likely select a destination for a new Tesla (TSLA) factory by the end of the year. It’s a closely-watched move by Tesla investors and customers as where the company goes next could have major implications for its future as well as the area’s economy.
Tesla currently has six Gigafactories globally: four in the U.S., one in China and one in Germany. Four of them assemble electric vehicles. Musk has floated Canada, Mexico, India and China (again) as possible destinations for the next Tesla Giga. Meanwhile, nations previously off Musk’s radar are courting Tesla with financial incentives in hopes of boosting their economy.
On Sunday (Sept. 17), during a meeting with Musk in New York City, Turkish President Recep Tayyip Erdogan, invited the Tesla CEO to build a new plant in Turkey, the country’s state news agency Anadolu reported today. Erdogan is in New York this week to attend the United Nations General Assembly.
Musk responded diplomatically that Turkey “is among the most important candidates” for his next factory, according to Anadolu.
In August last year, evidence surfaced that Musk was eyeing Canada after the U.S.’s newly enacted Inflation Reduction Act limited electric vehicle tax credits to vehicles produced in North America. Tesla already has a facility in Markham, a city in the Canadian province of Ontario, that makes assembly line machinery for Tesla Gigafactories around the world.
In June 2022, Musk told Tesla employees he was looking for additional factory sites in North America. Mexico was also on his radar. At Tesla’s Investor Day event in March this year, Musk announced plans to build a factory in northern Mexico to produce its next-generation, cheaper electric vehicles. The construction and operation timeline is unclear.
Another likely destination is India, for its low labor cost and vast consumer market. The Indian government is eager to grow the country’s electric car market as part of its clean energy initiative. Musk reportedly has spoken with Indian government officials about opening a facility for producing low-cost electric vehicles in India, Reuter reported in August.
The Wall Street Journal reported yesterday Tesla is also in early-stage talks with Saudi Arabia to set up a manufacturing facility there. But Musk denied the report in a tweet.
How Tesla selects factory sites
Like traditional automakers, Tesla’s logic for selecting factory sites begins with an intention to sell locally manufactured cars. In 2018, Tesla picked China as the destination for its first overseas factory in part because of the country’s giant auto consumer market. It chose Germany in 2020 for the same reason.
Musk tweeted in May 2022 Tesla won’t set up a manufacturing facility in a country where it’s not allowed to sell and service its cars.
Tesla’s presence in India and Turkey is limited for now. The company began taking orders from Turkey for the first time in April, with Model Y as the only available vehicle. Teslas are still not available in India, due to the country’s high import tariffs on foreign passenger cars.
However, Musk has said a factory in India is “quite likely” as long as the Indian government lowers auto import duties or imposes a “temporary tariff relief” on electric vehicles.
Government subsidies and tax advantages could also influence Musk’s decision. When Tesla was selecting factory sites in China, the Shanghai local government stood out from competing cities by offering Tesla generous tax benefits, among other incentives.
Turkey, whose economy has been on a downward spiral in recent years due to high inflation and the government’s reluctance to tighten monetary policy, is expected to invest up to $1.5 billion annually to revive the country’s manufacturing sector, according to the U.S. Commerce Department. The government spending could benefit Tesla if it were to open an auto factory there, although it’s not yet clear how.
At yesterday’s meeting, Erdogan also proposed collaboration opportunities between Musk’s rocket company SpaceX, and Turkey’s government space program and invited the billionaire to attend Teknofest, Turkey’s largest aerospace and tech festival starting later this month.