Tesla's Taiwanese Supplier Hota To Establish First US Factory Amid Surging Shipping Costs

In an effort to mitigate high shipping costs and rising cross-strait tensions, Hota Industrial Mfg. Co, a Taiwanese supplier to major automobile makers including Tesla Inc. TSLA, has announced the construction of its first United States factory.

Hota, as reported by Reuters, has been grappling with escalating costs of shipping and political tensions between Taiwan and China. To address these challenges, the company announced in September a $99 million investment to establish a factory in New Mexico, marking its first enterprise outside Asia.

The company’s CEO, Holly Sheng, expressed that the decision was a strategic move to guarantee supply chain security and to be closer to North America, which accounts for 70% of Hota’s sales. However, Sheng also acknowledged the financial burden of the venture.

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Construction of the factory is slated to begin early next year, with the commencement of large-scale production anticipated in 2025. Hota selected New Mexico for its comparatively lower costs and its proximity to key customers in the U.S. and Mexico.

The New Mexico government has pledged $3 million in funding for the project, in conjunction with potential tax credits. Despite the elevated operational costs in the US, Hota believes in the benefits of scale, vertical integration, and its expertise in the industry. The company also anticipates gaining from the U.S. Inflation Reduction Act, which incentivizes EV manufacturers to source domestically.

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