MEXICO CITY — Mexico’s president announced Tuesday that electric car company Tesla has committed to building a large plant in the industrial center of Monterrey in northern Mexico.
President Andrés Manuel López Obrador said the promise came in phone calls he had on Friday and Monday with Tesla head Elon Musk. This is Tesla’s third plant outside the US, after one in Shanghai and one near Berlin.
López Obrador previously rejected such a plant in the arid northern state of Nuevo Leon of which Monterrey is the capital, because he did not want water-hungry factories in a region suffering from water shortages. But he said Musk’s company has offered commitments to address concerns, including using recycled water.
“There is a commitment that all the water used in the production of electric cars will be recycled water,” said López Obrador.
The president said it was a big investment without giving a dollar amount, and didn’t specify what the plant could do. He said it was unclear whether it would make batteries, an industry Mexico is keen on despite not having any current supply of lithium.
López Obrador said the company plans to release more details on Wednesday.
“This means a substantial investment and many, many jobs,” López Obrador said. “My understanding is that it’s going to be huge.”
Monterrey is highly industrialized and close to the US border, and has long been considered prime for any Tesla investment.
But the city suffered a water shortage in 2022 that was so severe that many homes were left without running or water supply for weeks. The government built a 60-mile (100-kilometer) pipeline to bring in more water from a dam.
López Obrador previously said his government “will not issue permits” for any new plants there. But apparently Musk’s proposal went beyond the president’s stance.
Gabriela Siller, chief economist of Banco Base based in Nuevo Leon, said that the investment in Tesla – which she estimated could be worth $ 10 billion – represented such a large amount that it overrode any objections of the president .
López Obrador “can’t refuse it. The political costs for him are too high,” Siller said.
The announcement was a disappointment for many water-rich southern states that began jockeying for the Tesla plant after López Obrador’s comments last week.
The governor of Nuevo Leon state, where billboards went up last year saying “Welcome Tesla,” was tight-lipped about Tuesday’s announcement.
“Mexico won, Nuevo Leon (NL) won, EVERYONE WON!” Written by Gov. Samuel Garcia on his Twitter account.
López Obrador said Mexico will not match any US subsidies to win the Tesla plant, referring to US incentives under the 2022 Inflation Reduction Act.
“A subsidy like that, we can’t give subsidies like that,” the president said, adding “Mr. Musk is very attentive, respectful” to Mexico’s position.
Tesla is expected to announce plans for its “Gen 3” vehicle platform on Wednesday at its annual investment day at a factory near Austin, Texas.
Musk previously floated the idea of building a $25,000 electric vehicle, which would cost about $20,000 less than the current Model 3, which is 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 show the company’s production line at the Austin plant, as well as discuss long-term expansion plans, how it will spend capital investment dollars, and other topics.
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AP reporter Tom Krisher contributed to this report