Mexico announces assembly of Tesla plant with US$5 billion investment

The US company Tesla, owned by tycoon Elon Musk, will install an electric car factory in the city of Monterrey (north), with an investment of about US$5 billion, the Mexican government announced Tuesday (28).

The company’s arrival in Mexico was confirmed early Tuesday by President Andrés Manuel López Obrador, who said he sealed the deal with Musk during a telephone conversation on Monday.

“We brought Mexico an investment of more or less US$5 billion for the installation of the largest electric vehicle plant in the world,” Martha Delgado, deputy foreign minister for Multilateral Affairs and Human Rights, later detailed.

The Vice-Chancellor traveled to Austin (Texas) to attend Musk’s announcement of his investment plan for 2023.

Tesla will be installed in the metropolitan area of Monterrey, the capital of the state of Nuevo León, which is continually affected by water shortages, but the company has committed to consider this problem, assured the leftist president.

“This will mean a considerable investment and many jobs,” said López Obrador in his morning press conference.

The capital to be injected by Tesla will be one of the country’s largest registered in recent years, which in 2022 totaled US$35.292 billion in foreign direct investment, according to preliminary estimates by the Mexican Foreign Ministry.

The president was emphatic on the issue of water, a chronic problem in several northern states of the country.

In 2022, Nuevo Leon authorities were forced to ration supplies due to a prolonged drought.

Musk “understood the importance of addressing the problem of water scarcity (…) with the use of recycled water, water treatment even for painting cars,” he said.

López Obrador, who revealed that he had already had a first conversation with the magnate last Friday, had publicly raised the possibility of the plant being established in another region of the country with greater resource availability.

The Mexican government’s concern is based on the population increase that these investments could bring.

INDUSTRIAL HUB

Tesla, which sold a record 1.31 million cars in 2022, is the most recent large automotive company to set up in Mexico, where manufacturers such as Ford, General Motors, Volkswagen, or BMW already operate, producing vehicles mainly for the United States.

The companies seek access to the US market and the advantages of the T-MEC free trade agreement between Mexico, the United States, and Canada.

For this reason, many of them are located near the border, such as Nuevo León, a state with a strong industrial vocation that also hosts a plant of South Korea’s Kia.

To mitigate the water shortage problem, which is worsening with increasingly extreme temperatures, the Mexican government is building a new aqueduct and rehabilitating wells to extract the liquid.

It has also agreed with companies with concessions to hand over part of the water they use.

The plant to be built by Tesla is in addition to the 39 that the automotive sector already has in the country, including vehicle, engine, and transmission factories.

In 2022, the assemblers produced 3.3 million vehicles and exported 2.8 million units, according to official figures.

AMBITIOUS BET

When announcing Tesla’s investment, López Obrador said that “the batteries were pending”, although he said he was satisfied “with what was achieved”.

“We talked about the fact that we could not, in the case of batteries, of semiconductors, give the subsidies that the US government is allocating (…). He (Musk) understood this perfectly,” he said.

Electric cars, such as those produced by Tesla and other companies, use mainly lithium in their batteries.

Only 23 countries have detected the presence of this mineral, and it is estimated that Mexico occupies the tenth position in reserves, according to the Ministry of Energy.

Just last February 20, the government formalized the nationalization of lithium.

This input is mainly exploited in South America and Australia, and China dominates the supply chain.

Mexico has important lithium deposits in the northern state of Sonora, bordering the United States.

Through the “Sonora Plan” for clean energy, the López Obrador government seeks to exploit lithium and has invited automakers such as Tesla to the project.

The plan also involves the construction of solar parks in line with the goal of a 35% reduction in Mexico’s carbon emissions by 2030.

The juncture seems unbeatable as automakers are changing their production lines to bet on electric cars, in line with the U.S. goal that 50% of the cars sold in that country by 2030 will be of this type.

For example, US General Motors plans to start producing electric cars this year at its Coahuila (north) plant.

In February, German BMW announced it would invest €800 million in Mexico to produce electric cars at its facilities in San Luis Potosí (north), including a high-voltage battery plant.

With information from AFP