Tesla to build a manufacturing plant in Mexico

Mexican President Andrés Manuel López Obrador says the northern Mexican industrial hub of Monterrey will host the operation

Electric-car maker Tesla Inc. plans to build a manufacturing plant in the northern Mexican industrial hub of Monterrey, President Andrés Manuel López Obrador said Tuesday.

López Obrador, who spoke several times in recent days with Tesla Chief Executive Elon Musk, added at his morning press conference that details of the investment would be made known Wednesday.

"This will mean a considerable investment, and many jobs," he said.

López Obrador said that Tesla agreed to a series of commitments to address water-shortage problems in Monterrey, including the use of recycled water in the manufacture of electric vehicles. "They are going to help," he said.

Tesla didn’t immediately respond to a request for comment.

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Andres Manuel Lopez Obrador

Mexican President Andres Manuel Lopez Obrador at his daily morning conference before reporters at the National Palace Feb. 6, 2023 in Mexico City. (Luis Barron / Eyepix Group/Future Publishing via Getty Images / Getty Images)

López Obrador had thrown into question the possibility of the electric-car maker building a plant in Monterrey, arguing that the city suffers water shortages because of its rapid urban growth in recent years. His administration had hoped to persuade Tesla to build elsewhere in Mexico, in central Hidalgo state close to the new Mexico City airport, or in the southeast of the country.

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Monterrey, Mexico from the air

Aerial view shows a part of the urban area in the state of Nuevo Leon, where Tesla will build a new electric car plant, in Monterrey, Mexico, Dec. 19, 2022.  (Reuters/Daniel Becerril/File Photo / Reuters Photos)

Growing demand for electric vehicles has set off a frenzy in the U.S. for building new car plants, with foreign-owned car companies targeting the U.S. for expansion and EV startups building out their manufacturing capabilities.

Musk said last year that the electric-vehicle maker would likely need about a dozen factories to reach its goal of selling 20 million vehicles annually by 2030. Tesla produced over 1.3 million vehicles last year and has been steadily adding production capacity at its plants in the U.S., China and Germany.

The car maker said in January said it would spend more than $3.6 billion to expand its plant near Reno, Nevada, where it assembles batteries and produces car parts. Tesla also filed paperwork for a potential $775 million expansion at its electric-vehicle plant near Austin, Texas.

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Tesla Gigafactory Texas

Tesla Gigafactory in Austin, Texas on Jan. 17. (Courtesy Jeff Roberts Twitter)

Mexico, the world’s seventh-largest automaker and fifth-largest exporter of cars and light trucks, has stepped up its efforts to advance production of electric vehicles. Vehicles and auto parts account for around 3.5% of Mexico’s gross domestic product and a third of its manufactured goods exports.

German luxury carmaker BMW AG said in early February that it is investing 800 million euros, equivalent to about $848 million, to produce fully electric cars at its plant in the Mexican state of San Luis Potosí.

The shift toward electric vehicles was among topics at January’s North American Leaders Summit.

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Mexico has started seeing the benefits of companies moving production and supplies closer to the U.S. market in a trend known as nearshoring, which gathered pace after the global supply-chain disruptions suffered by manufacturers during the COVID pandemic.

Rebecca Elliott contributed to this article.