Mexican President Says Tesla Will Build Factory in Mexico

Mexico’s president announced Tuesday that electric car company Tesla has committed to building a large factory in the industrial center of Monterrey in northern Mexico.

President Andrés Manuel López Obrador said the promise was made during phone calls he had on Friday and Monday with Tesla chief Elon Musk. This will be Tesla’s third factory outside the US, after one in Shanghai and one near Berlin.

López Obrador had previously ruled out such a plant in the arid northern state of Nuevo Leon, where the capital Monterrey is located, because he did not want water-starved plants in a water-deprived area. But he said Musk’s company has made commitments to address those concerns, including using recycled water.

“There is a commitment that all water used in the production of electric cars will be recycled water,” said López Obrador.

The president said it would be a large investment without giving a dollar amount, and did not specify what the plant would produce. He said it was unclear whether it would manufacture batteries, an industry that Mexico desperately wants despite currently not having any domestic supply of lithium.

López Obrador said the company planned to release more details on Wednesday.

“This means a significant investment and a lot of jobs,” said López Obrador. “I understand it’s going to be huge.”

Monterrey is a highly industrialized city close to the US border that has long been considered a front-runner for any Tesla investment.

But the city is already experiencing such a severe water shortage by 2022 that many homes have had to go weeks without a constant or no water supply. The government is building a 60-mile (100-kilometer) pipeline to bring more water from a dam.

López Obrador has previously said that his government “simply won’t license” any new factories there. But it seems that Musk’s proposal has overtaken the president’s position.

Gabriela Siller, chief economist at Nuevo Leon-based Banco Base, said the investment in Tesla – which she estimates could be worth $10 billion – is an amount so large that it overcomes any objections. president.

“López Obrador” can’t deny this, says Siller.

The announcement is a disappointment to the more water-rich southern states that have begun to scramble for the Tesla factory following López Obrador’s comments last week.

The governor of Nuevo Leon state, where billboards were erected last year saying “Welcome Tesla,” was delighted about Tuesday’s announcement.

“Mexico won, Nuevo Leon (NL) won, WE ALL WINN!” Governor Samuel García wrote on his Twitter account.

López Obrador said Mexico would not match any US subsidies to win the Tesla factory, referring to US incentives under the Inflation Reduction Act of 2022.

“A subsidy like that, we can’t subsidize like that,” the president said, adding that “Mr Musk is very attentive, respectful” of Mexico’s position.

Tesla is expected to announce plans for its “Gen 3” vehicle platform on Wednesday at its annual investment day at a plant near Austin, Texas.

Musk previously floated the idea of ​​building a $25,000 electric car that would cost about $20,000 less than the current Model 3, currently Tesla’s cheapest car. Many automakers build lower-cost models in Mexico to save on labor costs and protect profit margins.

Musk is also expected to showcase the company’s production line at the Austin plant, as well as discuss long-term expansion plans, how capital investment will be spent, and other topics.

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