Mexican president says Tesla to construct plant in Mexico

MEXICO CITY — Mexico’s President Andrés Manuel López Obrador said Tuesday that electric automobile company Tesla has committed to constructing a plant in the commercial hub of Monterrey in northern Mexico.

López Obrador said the promise got here in phone calls he had Friday and Monday with Tesla head Elon Musk.

López Obrador had previously ruled out placing such a plant within the arid northern state of Nuevo Leon, where Monterrey is the capital, because he didn’t want any water-hungry factories in a region that has suffered severe water shortages. But he said Musk’s company had offered several commitment to deal with those concerns, including using recycled water.

“There’s one commitment that each one the water utilized in the manufacture of electrical automobiles will probably be recycled water,” López Obrador said.

López Obrador didn’t specify the dimensions of the investment or what the plant would produce, noting that the corporate planned to release more details on Wednesday.

But he said “that is going to mean a substantial investment and lots of, many roles.”

“My understanding is that it’s going to be very big,” López Obrador said, but it surely was unclear if the plant would produce batteries, noting that “the batteries are still pending.”

Tesla already has two plants outside the USA, one in Shanghai and one other near Berlin.

Monterrey is very industrialized and shut to the U.S. border, and had long been considered the frontrunner for any Tesla investment.

But town suffered such severe water shortages in 2022 that many homes went weeks with intermittent or no water supply in 2022. The federal government is constructing a 60-mile (100 kilometer) pipeline to bring more water in from a dam to extend the provision.

López Obrador had previously said his government “simply won’t grant permits” for any latest plants there. But apparently Musk’s proposal overrode the president’s stance.

The announcement was a disappointment for more water-rich southern states which had begun jockeying for the Tesla plant after López Obrador’s comments last week.

The governor of Nuevo Leon state, where billboards went up last 12 months saying “Welcome Tesla,” crowed about Tuesday’s announcement.

“Mexico won, Nuevo Leon (NL) won, WE ALL WIN!” Gov. Samuel García wrote in his Twitter account.

Musk at times has floated the thought of constructing a $25,000 electric vehicle that will cost about $20,000 lower than the present Model 3, now Tesla’s least-expensive automobile. Many automakers construct lower-cost models in Mexico to save lots of on labor costs and protect profit margins.

López Obrador said Mexico would not match any U.S. subsidies to win the Tesla plant, referring to U.S. incentives under the 2022 Inflation Reduction Act, which provides a tax credit of as much as $7,500 for electric vehicles assembled in North America.

“A subsidy like that, we cannot give subsidies like that,” the president said, adding “Mr. Musk was very attentive, respectful” of Mexico’s position.

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