Tesla’s arrival fuels Mexico’s ‘nearshoring’ boom

Governor Samuel Garcia is a man of haste, aligning between the birth of his daughter and Tesla’s arrival in northern Mexico, which hopes to benefit from a new wave of foreign investment.

The governor of Nuevo Leon state, 35, said production of Tesla electric cars could begin next January at the giant new factory outside Monterrey.

This is part of a “closer” trend of US companies—and their suppliers—choosing production sites near markets in the world’s largest economy, rather than in Asia.

Garcia told AFP in an interview that just hours before rushing to the maternity ward, construction work on the new Tesla factory could begin in April.

The bright-faced politician later posted a video of his daughter’s birth on Instagram, where he also shared a photo of himself meeting Tesla boss Elon Musk in early March.

Less than a week after Musk confirmed earlier this month plans to build a new “giga factory” in Mexico, his teams have been examining the land outside Monterrey.

While Musk gave few details about the new plant, the Mexican government said the investment would total about $5 billion.

“It’s a huge piece of land where they’re going to build the biggest factory in the world,” Garcia said, adding that the land is said to be more than 1,600 hectares (about 4,000 acres).

The politician hopes the investment will create 7,000 direct jobs—and about 40-50,000 indirect jobs—in Monterrey.

The city, located about 200 km (124 mi) from the US border and 600 km from Tesla’s headquarters in Austin, Texas, is already an industrial powerhouse.

Now Tesla is expected to bring in more companies that make parts for tram.

From November to February, about 30 Tesla suppliers visited the area, Garcia said.

Taiwanese company Quanta, which makes the “brains” inside electric cars, has employed 2,500 people since it started operations in Nuevo Leon in December 2021 – a pace at which one of its managers company philosophy called “crazy”.

French windshield manufacturer Saint-Gobain is already in the region and will soon be followed by Faurecia, the car seat company.

Social challenges

However, civil society activists offer a cautious note about the excitement among Nuevo Leon’s elites.

The region, home to 5.7 million people, has been affected by severe drought last year, and pollution clouds regularly cover the mountains around Monterrey.

“The state must be able to respond in record time” to “needs for housing, water, mobility, health, schools” due to the demographic boom.

Mexican President Andres Manuel Lopez Obrador said last month that Tesla had promised to tackle water scarcity, with tentative measures including the use of recycled water.

The “Tesla effect” and nearshore trends are being felt a few hundred kilometers northwest of Monterrey, in Ciudad Juarez.

This border city is home to “maquiladoras”—factories set up primarily by U.S. companies that employ Mexican workers to produce finished products such as electronic components for export to the United States.

Rising US-China tensions and the crippling impact of the coronavirus pandemic on international supply chains, among other factors, have given new impetus to hundreds of such factories in Juarez.

“It’s a boom,” said the city’s economic development superintendent, Ivan Perez, who is worried about the labor shortage.

“We need 30,000 employees,” he said.

New warehouses are springing up in industrial parks built along the wall along the border between Juarez and El Paso, Texas.

Jorge Bermudez, an industrial hangar developer, said that four Taiwanese companies, including Apple’s subcontractor Foxconn and Tesla’s supplier Pegatron, “are in the process of building 70,000 square meters of facilities. matter”.

Eduardo Cinco, who works for a real estate company that helps companies find new locations, also noticed a dramatic change.

“In 20 years, I have never seen availability fall below 5% of available surface area,” he said.

According to Jesus Manuel Salayandia, outgoing president of the local branch of the National Chamber of Transformational Industry, the boom may not be quite as beneficial as it seems.

In the decades since the maquiladoras arrived in northern Mexico, “there has been no real transfer of technology” supporting the country’s industrial development, he said.

© 2023 AFP