Tesla to build new electric car factory in Mexico, its first in South America


A Mexican official said the plant would be Tesla’s “Gigafactory” capable of producing Semi trucks, Roadster sports cars and possibly other vehicles. Another official said the plant could produce a sports utility vehicle (SUV).

The Model Y is Tesla’s best-selling SUV. The Mexican government said Tesla would likely provide details of its plans on Wednesday.

Lopez Obrador’s announcement of a factory in the Monterrey metro area put to rest recent concerns that he could upend investment by imposing conditions on companies due to water shortages in the arid border region.

“It will represent a lot of investment and many, many jobs,” Lopez Obrador told reporters. He said Chief Executive Elon Musk had embraced Mexico’s concerns and had a discussion on how to address water issues. Shortages made promises.

The president said that would involve, in part, Tesla recycling the water used in the assembly process.

Mexico’s deputy foreign minister, Martha Delgado, told Milenio Television that the investment was worth “more than $5 billion” and that Tesla would produce about 1 million vehicles a year for domestic and international markets.

Tesla’s combined annual production capacity at other factories exceeds 1.9 million vehicles.

Separately, a Mexican source with knowledge of the matter said the initial investment was worth about $1 billion and further investments could bring the total payout to $10 billion.

Tesla did not respond to a request for comment.

The company has automotive plants in the U.S. states of California and Texas, as well as in Berlin and Shanghai.

Musk, who has said for months that the electric car maker would announce a new factory, will discuss expansion plans, next-generation vehicle platforms and other topics at an “investor day” event on Wednesday. The company is also expected to detail a new, less expensive model at the event.

The news is a boost for Mexico, which is trying to establish itself as a so-called nearshoring investment hub – taking advantage of geopolitical tensions and supply chain disruptions caused by the COVID-19 pandemic to attract manufacturing capacity to North America, Stay away from Asia.

Lopez Obrador said Mexico and Tesla reached an agreement after a phone call with Musk on Monday, after he said the two had another conversation late last week.

eyes of the world

The city’s mayor, Jesus Nava, said the plant would be built in the state of Santa Catarina in the greater Monterrey region, echoing reports that had been circulating for weeks.

“Santa Catarina will turn the world’s attention,” he said on Instagram. In another video, marked “$10 billion” in bright red, Nava said Tesla’s investment would be five times the city’s private investment over the past decade.

Mexican Foreign Minister Marcelo Ebrard praised the news on Twitter, saying it was the result of 14 months of “patient labour”.

Mexican-made electric vehicles shipped to the U.S. are eligible for subsidies offered by the Biden administration to boost EV adoption, according to industry officials.

The call between Musk and Mexico’s president came after Lopez Obrador stoked fears on Friday that he could block the attack on Monterrey if water was too scarce there. invest.

Lopez Obrador said he told Musk that Mexico would not subsidize the manufacture of batteries or semiconductors.

The discussions around Tesla have been a major test of how investors respond to Lopez Obrador’s resource nationalism and how he influences the investment decision-making process, raising doubts in the business community.

Lopez Obrador blocked billions of dollars worth of investments through a referendum, with some Mexican media describing his decision to back the Tesla factory as a concession to Musk.

Antonio Ocaranza, head of consultancy group Oca Reputacion, said the president had finally shown common sense by allowing such a major deal, which should attract more investment.

“The president knows how far to push it,” he said. “Behind (his) rhetoric and ideological enthusiasm is pragmatism.”

Speculation has swirled for months about Tesla’s move to Mexico, where the factory is expected to be one of the major investments of Lopez Obrador’s government.

Mexico records its highest foreign direct investment in years in 2022 as companies take advantage of low-cost and skilled labor and a free trade agreement with the United States that has made the country a global hub for the auto industry.

However, Lopez Obrador’s efforts to tighten state control of energy markets at the expense of private capital have unnerved businesses, holding back overall investment.

First published date: March 1, 2023 at 08:14 AM CST


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