On Tuesday, Mexican President Andres Manuel Lopez Obrador announced that electric car manufacturer Tesla will be opening a large plant in the industrial hub of Monterrey, Nuevo León. Following a phone call with Tesla CEO Elon Musk, the president revealed that the investment could be worth up to $10bn for the region.
The decision marks a significant boost for Mexico’s efforts to pitch itself as an alternative to Asia for US-based companies looking to establish manufacturing operations. It also comes as the country has seen more foreign investment than at any point in the last several years, with German manufacturer BMW announcing earlier this month that it would invest about $870m to make electric cars in the Mexican state of San Luis Potosi.
Lopez Obrador had previously ruled out situating a Tesla plant in Nuevo León due to water concerns, as the state had been forced to ration water after a drought emergency was declared in July. However, the president sought to allay fears on Tuesday, stating that the new plant would use recycled water.
The economic benefit of the Tesla plant could also help Lopez Obrador’s Morena party as Mexico nears its 2024 presidential election. According to chief economist Gabriela Siller of Nuevo Leon-based Banco Base, the deal could bring up to $10bn in investments to Mexico. Siller said that the president “could not turn this down” as it would have had a “very big political cost” for him.
Tesla is expected to provide further details about the new plant on Wednesday during its “Investor Day” event, when Musk is scheduled to speak. The announcement is a major milestone for Mexico and its efforts to attract foreign investment and create jobs in the region.