Tesla To Build Next-Generation Vehicle In Austin Before Mexico!

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Even though many Tesla bulls think a “Model 2” (aka “Model C” or $25,000 Tesla) may be unnecessary if Tesla gets FSD (Full Self Driving) working in the next 12 months, it seems from this latest excerpt from Walter Isaacson’s book about Elon that the realists at Tesla have convinced Elon to allow the design and production of a next-generation compact car. If not for the US, at least for markets that won’t approve full self driving.

My personal opinion is that it will take several years to solve all the FSD issues, despite excitement surrounding Elon’s recent demo of V12 FSD. The next-generation compact will be designed to use the same platform as the robotaxi, so it can share the manufacturing innovations described at Tesla Investor’s Day in March of this year. For more, we wrote about it here, here, and here.

I suggested in a post yesterday in reply to news the Mexico gigafactory was delayed, possibly for years, that Tesla should just expand the Austin gigafactory for now. It sounds like Elon came to the same conclusion.

Reasons To Build In Austin

  1. Tesla already has a lot of engineering talent at Austin. And it would be difficult for Tesla to convince many of those people to move to Mexico (as stated in the book excerpt).
  2. Tesla didn’t seem to have any problems getting permits in Austin, and construction seemed to be very quick.
  3. Tesla already has significant infrastructure in Austin and can likely test production in an existing building.
  4. The company can build a sprung structure (or “tent” as it was called by Tesla bears) in 19 days according to this case study.

Reasons To Build In Mexico

While I’m a fan of designing and building the Model 2 in Austin, I have long (3 and a half years) advocated for plant in Mexico, too.

  1. Mexico has more free trade agreements than any other country! This is key to exporting to many of the countries in South America and Southeast Asia. It even has an agreement with the European Union!
  2. I’m sure Tesla will pay better, but existing manufacturing workers are reported to make about $5 an hour.
  3. Mexico has more engineering students than the US. Tesla would likely get the cream of the crop from that pool.


I think the best of both worlds is to design the next-generation product in Austin, but then build both in the US to satisfy the large US market while also building a large volume in Mexico (and other locations too) to serve a larger global market.

If you want to take advantage of my Tesla referral link to get $500 off a new Tesla plus 3 months free trial of Full Self Driving, here’s the code: https://ts.la/paul92237 — but if another owner helped you, please use their link instead of mine, since I have enough referral credits.  If you want to learn more about Tesla’s referral program, here is the link with the latest details

Disclosure: I am a shareholder in Tesla [TSLA], BYD [BYDDY], Nio [NIO], XPeng [XPEV], Hertz [HTZ], and several ARK ETFs. But I offer no investment advice of any sort here.

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Paul Fosse

I have been a software engineer for over 30 years, first developing EDI software, then developing data warehouse systems. Along the way, I've also had the chance to help start a software consulting firm and do portfolio management. In 2010, I took an interest in electric cars because gas was getting expensive. In 2015, I started reading CleanTechnica and took an interest in solar, mainly because it was a threat to my oil and gas investments. Follow me on Twitter @atj721 Tesla investor. Tesla referral code: https://ts.la/paul92237

Paul Fosse has 240 posts and counting. See all posts by Paul Fosse