Tesla is building a new factory in Mexico

Tesla plans to build a new factory in Mexico along with other automakers expanding their presence south of the US border.

Mexico’s president Andres Manuel Lopez Obrador said the factory for the electric car company would be in Monterrey, about three hours from Texas.

Tesla is expected to share more on Wednesday during its investor presentation.

Mexico had previously expressed concern about the impact of the plant’s water demand on the region.

But Mr Lopez Obrador said he won pledges from Tesla boss Elon Musk that allayed those concerns.

Mexico is trying to position itself as a winner as tensions between the US and China disrupt traditional supply chains.

“This will mean a significant investment and a lot of jobs,” Lopez Obrador said at a press conference on Tuesday.

US President Joe Biden has emphasized made-in-America rules for cars to qualify for new subsidies included in a massive spending plan approved last year to tackle climate change.

But the rules provide exceptions for Canada and Mexico, which has seen its role in auto production grow as American companies look abroad to reduce costs.

This would be Tesla’s third factory outside the US, after the company opened factories in China and Germany in recent years.

Reuters reported that the newest Tesla factory represented an initial investment of $1 billion, which could grow to $10 billion over time.

Martha Delgado, a Mexican deputy foreign minister, told Milenio Television that the investment was worth “more than $5 billion” and that the plant would produce about a million vehicles a year.

Another unnamed Mexican official told Reuters news agency the plant would become a Tesla “gigafactory” that will produce vehicles, including their truck and sports car.

The company did not respond to a request for comment on the latest expansion.

Tesla, like other automakers, expects EV purchases to increase rapidly in the coming years as drivers move to greener modes of transportation.

The confirmation of Tesla’s plans comes just weeks after BMW said it would invest in a factory in Mexico. Ford also produces its electric SUV in the country.

General Motors announced plans last year to build an electric car plant in Mexico, prompting the United Auto Workers union to describe the decision as a “slap in the face.”

In Mexico, investment has been closely watched as a test of the investment climate under Mr Lopez Obrador, a left-wing populist elected in 2018.