Tesla to build plant in Mexico, Lopez Obrador says

Mexico's President Andres Manuel Lopez Obrador said on Tuesday that electric car company Tesla has committed to building a plant in the city of Monterrey, an industrial hub in northern Mexico. Mr Lopez Obrador said the promise came in phone calls he had on Friday and Monday with Tesla head Elon Musk.

The Mexican President had previously ruled out placing such a plant in the arid northern state of Nuevo Leon, of which Monterrey is the capital, because he did not want any water-hungry factories in a region that has suffered severe water shortages. But he said Mr Musk’s company had offered several commitments to address those concerns. “There is one commitment that all the water used in the manufacture of electric cars will be recycled water,” Mr Lopez Obrador said.

He did not specify the size of the investment or what the plant would produce, noting that the company planned to release more details on Wednesday.

However, he said that “this is going to mean a considerable investment and many, many jobs”. Tesla already has two plants outside the US, one in Shanghai and another near Berlin. Monterrey is highly industrialised and close to the US border, and had long been considered the front-runner for any Tesla investment.

But the city suffered such severe water shortages in 2022 that many homes went weeks with intermittent or no water supply in 2022. The government is building a 100-kilometre pipeline to bring more water in from a dam to increase the supply.

Mr Lopez Obrador had previously said his government “simply won't grant permits” for any new plants there. But apparently Mr Musk's proposal overrode the President's stance. The announcement is certain to come as a disappointment for more water-rich southern states which had begun jockeying for the Tesla plant after Mr Lopez Obrador's comments last week.

Mexican governors had gone to extremes, putting up billboards, creating special car lanes or creating mock-ups of Tesla advertisements for their states in a bid to attract the plant.

Mr Musk at times has floated the idea of building a $25,000 electric vehicle that would cost about $20,000 less than the current Model 3, now Tesla’s least-expensive car. Many car makers build lower-cost models in Mexico to save on labour costs and protect profit margins.