Tesla to build plant in Mexico

Mexico City –

Mexico’s president announced on Tuesday that electric-car company Tesla has committed to building a massive factory in Monterrey, the industrial hub of northern Mexico.

President Andrés Manuel Lopez Obrador said he had phone calls with Tesla boss Elon Musk on Friday and Monday. This will be Tesla’s third factory outside the United States, following one near Shanghai and Berlin.

Lopez Obrador had previously ruled out building such a plant in the arid northern Nuevo Leon state, where Monterrey is the capital. He said he promised to deal with it.

“We have one promise: all water used in the production of electric vehicles will be recycled water,” Lopez Obrador said.

The president said it would be a large investment without divulging the amount, and declined to say what the factory would produce. He said it was unclear if Mexico would produce batteries, an industry it desperately wants, despite the current lack of domestic supplies of lithium.

Lopez Obrador said the company plans to announce details on Wednesday.

“This will mean a lot of investment and a lot of hiring,” Lopez Obrador said. “My understanding is that it’s going to be very big.”

Monterrey is highly industrialized, close to the U.S. border, and has long been considered a prime candidate for a Tesla investment.

However, the city will experience severe water shortages in 2022, with many homes experiencing intermittent or no water for weeks. The government is building 60 miles (100 kilometers) of pipelines to draw more water from the dam.

Lopez Obrador has previously said his government “just won’t give permission” to build a new factory there.

Gabriela Schiller, chief economist at Nuevo León-based Banco Base, said the Tesla investment, which she estimated was worth $10 billion, is a very large sum and the president’s He said he had defeated any opposition.

Lopez Obrador “couldn’t have said no to this. It would have cost him a huge political price,” Schiller said.

The announcement was a disappointment for the water-rich southern states, which have begun competing for the Tesla factory after Lopez Obrador’s comments last week.

The governor of Nuevo Leon, which had a “Welcome to Tesla” sign last year, roared about Tuesday’s announcement.

“Mexico won, Nuevo Leon (NL) won, we all won!” Governor Samuel Garcia wrote on his Twitter account.

López Obrador, referring to US incentives under the 2022 Inflation Reduction Act, said Mexico has no match for US subsidies to win the Tesla factory.

“You can’t give that kind of subsidy, that kind of subsidy,” the president said, adding that “Mr. Musk was very caring and respectful of Mexico’s position.”

Tesla plans to unveil plans for its “third-generation” vehicle platform at its annual Investor Day on Wednesday at its factory near Austin, Texas.

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

Musk will also show off the company’s production line at the Austin factory and discuss long-term expansion plans, how to use capital spending dollars, and more.

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