Hota Industrial Mfg. Co. has been manufacturing gears, shafts, and other auto components in Taiwan for many years. These parts have been supplied to major automobile manufacturers located in other countries, including Tesla (TSLA.O), Ford Motor (F.N.), and General Motors (GM.N.).

Some of Hota’s (1536. T.W.) clients have been forced to reevaluate their reliance on Taiwan, a democratically run island that China claims as its own, and has not ruled out the possibility of conquering by force. This is due to the fact that shipping prices have skyrocketed during the epidemic, and tensions across the Taiwan Strait have escalated and become more intense.

Hota made the announcement in September that it would be investing $99 million in a factory in New Mexico, which would be its first operation outside of Asia. This was done to answer customer concerns over the safety of the supply chain and relocate closer to North America, which accounts for 70 percent of the company’s sales.

“Our choice of the United States is actually a very natural decision,” said Hota CEO Holly Sheng in an interview with Reuters before the beginning of this month. On the other hand, the expense does not come naturally, which is why we decided to remain in Taiwan for such a long time.

Because of the pandemic, Hota, established in 1966, was forced to resort to costly air freight to transport heavy automobile parts to North America. This was because there were shortages of cargo containers and labor at ports during the epidemic.

“During COVID, even if your products were cheaper, they couldn’t be shipped,” according to Sheng. “Now, everyone can accept that ‘If you’re located closer to me, I’m willing to pay a bit more’.”

In one of Hota’s facilities in Taiwan, robotic arms shuttle metal cylinders through a sequence of machines, each of which is a stage in molding them into precise shafts that will connect with other powertrain components to make vehicles drive.

A portion of the more than 20 million components that Hota manufactures annually are included within the crates of gears and shafts that are stored at the facility.

The building of the facility is scheduled to start early in the next year, and mass production is scheduled to commence in 2025. Soon, Hota’s machines will be humming in Santa Teresa, New Mexico. In light of the fact that both the United States and Mexico are making greater efforts to establish supply chains for electric vehicles (EVs), Hota decided to locate its operations in New Mexico because of its closeness to consumers in both countries and its lower prices compared to other states.

“It will become the next Detroit,” Sheng stated for the Borderplex region, located along the border between the United States and Mexico. Hota’s factory will be located in close proximity to both Texas, where Tesla’s headquarters are located, and Mexico, where Tesla intends to construct a gigafactory.

According to Sheng, the United States would contribute between 5 and 8 percent of Hota’s production in the plant’s initial few years of operation. New Mexico will contribute three million dollars in funding and the possibility of tax credits.

Hota’s most significant competition in the United States will be its clients, who may manufacture components independently but may choose to outsource if suppliers can provide more affordable costs.

In order to save money, the majority of Taiwanese firms that are looking to establish a presence in North America chose Mexico over the United States, according to Sheng.

Sheng highlighted Hota’s size, vertical integration, and experience advantages, even though its prices in the United States will be more incredible.

According to Sheng, the United States Inflation Reduction Act will also assist in reducing cost constraints by providing incentives for electric vehicle manufacturers to obtain components from within the United States.

As a result of the highly automated manufacturing lines that Hota uses, the company is less concerned about rising salaries and a lack of available labor. This latter factor caused a delay in the manufacturing schedule for the $40 billion factory in Arizona that is owned by Taiwanese semiconductor giant TSMC (2330. T.W.).

On the other hand, a battle between China and Taiwan is a concern that hangs over the United States’ agenda.

“There’s no way to convince a customer that war will not happen,” according to Sheng. On a similar note, Hota would never be able to totally replace its production base in Taiwan, which is already well established. “But if you distribute the risk, however much, customers will feel more comfortable,” according to Sheng.