Mexican President Andres Manuel Lopez Obrador announced the decision Tuesday after a phone call with Elon Musk.
Mexican President Andres Manuel Lopez Obrador has announced that Tesla, an electric car maker, will open a major factory in northern Mexico, an investment that could bring the region up to $10 billion.
After a phone call with Tesla CEO Elon Musk on Tuesday, Lopez Obrador revealed that the factory would be located in the industrial center of Monterrey, the capital of the northeastern state of Nuevo León.
“This will mean a significant investment and a lot of jobs,” Lopez Obrador told reporters, adding that Musk was “very receptive” to concerns about issues such as water use in the parched region.
Mexico has pitched itself as an alternative to Asia for US-based companies looking to set up manufacturing operations, citing proximity as an advantage. Tuesday’s decision, which has yet to be confirmed by Tesla, would provide a major boost to those efforts.
Mexico is already home to one of the largest car manufacturing sectors in Latin America, second only to Brazil, with plants for American, European and Asian car companies.
Over the past year, more foreign investment has been brought into the country than at any other time in recent years. German manufacturer BMW announced earlier this month that it would invest about $870 million to make electric cars in the Mexican state of San Luis Potosi.
And in a July 2022 meeting with US and Mexican business leaders, Lopez Obrador boasted that US companies planned to invest $40 billion through 2024.
Some investors have viewed Lopez Obrador with skepticism as he attempts to extend state control over various sectors of the economy.
Lopez Obrador slammed the horns with the US and Canada over an energy policy that would do just that, with the two countries’ officials claiming the policies give Mexican energy suppliers an unfair advantage over private companies. The dispute has yet to be resolved.
At a news conference, the Mexican president said Tesla would likely provide more details about the new plant on Wednesday, when Musk will give a speech at Tesla’s “Investor Day.”
Tuesday’s announcement is, of course, a turnaround for Lopez Obrador, who had previously ruled out putting a Tesla factory in Nuevo León, citing water problems.
The Mexican state was forced to ration water after a drought emergency was declared in July, with Lopez Obrador calling the situation a “national security issue.”
But in Tuesday’s statement, Lopez Obrador sought to allay concerns about the dry state’s limited water resources by saying the new plant would use recycled water.
Some observers have also pointed out that the economic benefit of the Tesla plant could help Lopez Obrador’s Morena party as Mexico approaches the 2024 presidential election. Although Lopez Obrador himself is limited to a single term, his party continues to lead in early presidential polls.
Gabriela Siller, a chief economist at Banco Base in Nuevo Leon, estimated the Tesla deal could raise up to $10 billion in investment in Mexico. The president, she said, “couldn’t refuse this. It would have had a very high political price for him.”