Tesla arrives in Mexico with production plant and US$5 billion investment

Tesla arrives in Mexico with production plant and US$5 billion investment

The U.S. company TeslaElon Musk’s Tesla, will set up a factory of electric cars in the city of Monterrey (north), with an investment of some 5 billion dollars, the Mexican government announced on Tuesday.

The firm’s arrival in Mexicoico 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 5 billion dollars for the installation of the largest electric vehicle plant in the world,” Martha Delgado, Vice Chancellor for Multilateral Affairs and Human Rights, later explained.

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, capital of the state of Nuevo Leon, which is continuously affected by water shortages, but the company has promised to consider this problem, assured the leftist president.

“This is going to mean a considerable investment and many jobs”, highlighted López Obrador in his morning press conference.

The capital to be injected Tesla will be one of the largest registered in recent years in the country, 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 water issue, a chronic problem in several northern states of the country. In 2022, Nuevo Leon authorities were forced to ration the supply 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 establishing the plant in another region of the country with greater availability of the resource.

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

Industrial hub

Teslawhich sold a record 1.31 million cars in 2022, is the most recent major automaker to set up shop in Mexicowhere manufacturers such as Ford, General Motors, Volkswagen and BMW already operate, producing vehicles mainly for the United States.

Companies are seeking access to the U.S. market and the advantages offered by the T-MEC free trade agreement between. MexicoUnited States and Canada.

For this reason, many of them are located in areas close to the border such as Nuevo León, a state with a strong industrial vocation that also hosts a plant of the South Korean Kia.

To mitigate the problem of lack of water, which is aggravated by increasingly extreme temperatures, the Mexican government is building a new aqueduct and rehabilitating wells to extract the liquid.

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

The plant to be built Tesla joins 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

In announcing the investment of TeslaLópez Obrador said that “the batteries are still pending”, although he said he was satisfied “with what has been achieved”.

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

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

Only in 23 countries has the presence of that mineral been detected and it is estimated that. Mexico ranks tenth 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 deposits in the northern state of Sonora, bordering the United States.

Through the “Sonora Plan” for clean energies, 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 farms in line with the goal of a 35% reduction in carbon emissions from Mexico 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 cars sold in that country by 2030 will be of this type.

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

Germany’s BMW announced at the beginning of February that it would invest 800 million euros (about 850 million dollars) in Mexico to produce electric cars at its facilities in San Luis Potosi (north), an investment that will also include a high-voltage battery plant. (AFP)

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Kayleigh Williams