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Discussion in 'TSLA Investor Discussions' started by neroden, Nov 26, 2018.
Not their first rodeo.
NAFTA is still largely in place which means no tariffs between the US and Canada. There were some changes made this year which affected the car industry, but they affect Mexico more than Canada or the US. The biggest thing in the changes were minimum wage requirements which will make it more expensive to do business making parts or cars in Mexico and may move some jobs back to the US or Canada.
The tariff talk will end when the current incumbent is out of the White House. Neither party think high tariffs are a good answer to trade issues except in some very limited situations.
I don't think Tesla is going to move Model S or X production. They are well established where they are. If they acquired a plant in Canada or some other shuttered vehicle plant, they would most likely use it for future vehicle production. They really don't have space to make the Model Y now and it would be a tight squeeze to make the Semi in any existing facility.
As @neroden pointed out, the GF has a lot of space around it, but there is a bad housing shortage in the area. That will improve as the GF grows, but I don't think it's a good idea to build vehicles in Nevada. The US has lots of shuttered vehicle plants, some newer than NUMMI was. If Tesla can get a good deal on one of those, that would speed up the process of getting new vehicles to market and would tap into laid off workers around the existing plant. When Tesla geared up for Model S production they hired back some of the old NUMMI workers.
If Tesla wants to get traction over turning the sales ban in places like Michigan, putting a plant there would certainly help, and would get a lot of auto workers on their side.
One question I have... I was under the impression that Tesla had moved to preferring their own new construction over repurposing existing factories?
Granted, if there's a deal they can't refuse...
Tesla maybe realized that people and housing are a factor also.
No, what the NAFTA deal did is make it so that 40-45% of the parts have to be made with $16/hour + labor. What's happening: more engine manufacturing in the USA, more assembly in Mexico.
They are a dead end, to be sure, but right now VW for example is basing a huge chunk of their future plans around it. These are newly revealed plans. Upcoming emission regulations combined with their reluctance and/or their self-assessed inability to go BEV full scale is driving that.
EDIT: Note that Toyota has managed to continue to grow their Prius Prime sales this year in the face of the rest of the Prius line-up tanking (although they are selling more hybrids in other product lines as their price premium for those variants drop vs their ICE-only counterparts). One in four Prius new sales in the US is a Prime.
It does have a lot of building but how much land comes with that? I don't know the site well. NUMMI only had 1/2 the factory floor space as Oshawa but it came on >200ac of land.
They all are. GM's probably more ready for it than the other 2 US based majors. ¯\_(ツ)_/¯
EDIT: Remember that GM is about to roll out more BEVs, largely based on the Bolt platform. If killing the Volt is re-framed as evolving their hybrid strategy to BEV that actually puts them ahead of the curve for companies not named "Tesla".
One thing I haven't seen mentioned here is that the only vehicle Super Cruise has been available on, CT6, is on the axe list. Supercruise, although white list based, is the only real lane-hold Lv 2 system that challenger to EAP. GM had plans to add the feature to future Cadillacs (EDIT:and potentially beyond at some point, IIRC) but not starting until sometime in 2020.
Yeah, that's important to understanding the car industry under NAFTA. Even predating the Canada-US free trade agreement in the late 80's, the area around the Great Lakes was something of integrated industry. That accelerated with the FTA as it removed a lot of the friction there. When Mexico joined in the mid-90's the whole industry became rather fluid in parts and partially assembled vehicles shuttling around between the 3 countries and that's had about 25 years to develop. This is mostly a natural evolution of that as Mexico's economy continues to develop, and that wage floor and rules for making unions more viable is likely to be good for Mexico longterm.
There is also an extra rule about the % of the finished vehicle that has be from inside NAFTA jurisdiction to qualify for NAFTA. How and how much that'll impact isn't clear to me, and probably will hinge a lot on future US trade policies regarding automobiles from "outside NAFTA", along will to some extent the same trade polices for Mexico and Canada.
Ontario has similar labor rates to Michigan. Tesla is only going to build another north American plant in a "right to work" state or Mexico. I'm sure that assembly in Mexico fed with parts from Sparks is a serious consideration.
California and UAW states like Michigan are too expensive. Reno has few people and 3% unemployment. Both are a problem.
'Alien Dreadnought" was an overly ambitious attempt to mitigate the impact of labor rates in the U.S. and Europe.
Cheap labour isn't always that cheap when you're a company based on high tech. Engineering at a distance is very difficult, especially for the type of very rapid design iteration that Tesla does.
Also, the new NAFTA deal has a "make unionizing easier in Mexico" clause.
The Germans seem to do well with strong unions and high wages. Don't know why that wouldn't work for Tesla.
AKA made up "it can't be done" BS.
Would that be the "managerial culture" which prefers workers to be serfs who are owned by the company?
Opinion | GM layoffs highlight our shredding financial safety net. Is it time to bring back pensions?
Today’s aging workforce faces an uncertain future. The announcement this week that General Motors will lay off 15 percent of its salaried workforce and shutter multiple plants in North America was a sobering reminder of how far the American worker has fallen. Unlike most large private sector corporations today, thousands of employees at GM still enjoy some union benefits. The company has reportedly set aside $2 billion for layoffs and buyouts. It's not much, but it's something — many workers, if they are laid off en masse, will be far less lucky.
Some older Americans are lucky enough to have been grandfathered into generous pension plans and others hope social security and personal savings will be enough to sustain themselves. But for millions of younger people, the outlook is bleaker — an ever-diminishing social safety net, with retirement dependent almost entirely on how well they manage savings. Two-thirds of millennials have nothing saved for retirement.
Corporate executives once believed in profit-sharing and using strong retirement benefits to retain employees. In today’s economy, with relatively low unemployment but a proliferation of low-wage jobs, human labor is viewed as more expendable. A hedge funder took control of Sears and led the company into a bankruptcy that would benefit his hedge fund. Wealthy shareholders are prioritized; the workforce itself is secondary.
So where do the German companies choose to build their high volume cars for the American market?
Due to import tax laws, a lot of the production is in the US. Given that they actively, heavily encouraged their employees to unionize at the plant the state's anti-union laws were quite unlikely to be the reason for location choice.
EDT: Anyway, seems to be getting a bit out in the weeds for this thread.
Per an article in the WSJ, Oshawa has the highest costs in all of North America. Since Elon already has the California politicos to deal with, expanding in the other 'CA' makes little economic sense, unless the Oshawa plant comes free with massive tax breaks.
By cultural difference, I mean that it seems to me that there's an antagonistic relationship between management and nions here, that's different to Germany. I don't know if the German system can be effectively duplicated.
Elon Musk very clearly doesn't want the UAW, anyway.
Nice write up.