Mexico’s President Andrés Manuel López Obrador said Tuesday that electric car company Tesla has committed to building a plant in the industrial hub of Monterrey in northern Mexico.
López Obrador said the promise came in phone calls he had Friday and Monday with Tesla head Elon Musk.
López Obrador had previously ruled out placing such a plant in 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 address those concerns, including using recycled water.
“There is one commitment that all the water used in the manufacture of electric automobiles will be recycled water,” López Obrador said.
López Obrador 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.
But he said “this is going to mean a considerable investment and many, many jobs.”
“My understanding is that it will be very big,” López Obrador said, but it was unclear if the plant would produce batteries, noting that “the batteries are still pending.”
Tesla already has two plants outside the United States, one in Shanghai and another near Berlin.
Monterrey is highly industrialized and close to the U.S. border, and had long been considered the frontrunner 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 60-mile (100 kilometer) pipeline to bring more water in from a dam to increase the supply.
López Obrador had previously said his government “simply won’t grant permits” for any new 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 year 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 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 automakers build lower-cost models in Mexico to save on labor costs and protect profit margins.
López Obrador said Mexico wouldn’t match any U.S. subsidies to win the Tesla plant, referring to U.S. incentives under the 2022 Inflation Reduction Act.
“A subsidy like that, we cannot give subsidies like that,” the president said, adding “Mr. Musk was very attentive, respectful” of Mexico’s position.
