Mexican president gives green light for Tesla plant in northern Mexico

MEXICO CITY, Feb. 28 (Reuters) – Electric vehicle manufacturer Tesla Inc. (TSLA.O) will build a new plant in the northern Mexican city of Monterrey, President Andres Manuel Lopez Obrador said Tuesday, allaying concerns his administration could block the deal over water shortages.

The news gives a boost to Mexico, which is working to establish itself as a hub for the so-called nearshoring of investments – capitalizing on geopolitical tensions and supply chain disruptions caused by the COVID-19 pandemic by shifting manufacturing capacity to North America lure, and away from Asia.

Lopez Obrador said the two sides reached an agreement following a phone call with Tesla Chief Executive Elon Musk on Monday, following a separate conversation he said the two had late last week.

“This will mean a significant investment and a lot of jobs,” Lopez Obrador told reporters, saying Musk was open to Mexico’s concerns and accepted his proposals.

At a press conference, Lopez Obrador said Tesla will likely provide more details on its plans on Wednesday.

Musk will hold an “Investor Day” on Wednesday, where he will outline his “Master Plan Part Three.”

Tesla did not immediately respond to a request for comment.

The talk between the two came after Lopez Obrador sparked fears on Friday that he could block investment in Monterrey if water was scarce in the arid region.

The president said Musk understood the challenge of water scarcity and the company would make a series of commitments as part of the deal.

The discussions surrounding Tesla were a major test of how investors reacted to Lopez Obrador’s resource nationalism, which has continually cast doubts among corporate groups.

Speculation about the prospect of Tesla going to Mexico has been circulating for months and the factory will become one of the most important investments of the Lopez Obrador administration.

Mexico received its highest inflow of foreign direct investment in years in 2022, official data showed, as companies took advantage of a cheaper and skilled labor force that has made the country a global center of the auto industry.

However, overall investment was held back by companies upset by Lopez Obrador’s efforts to strengthen state control of the energy market at the expense of private capital.

Reporting by Dave Graham; Edited by Sharon Singleton

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