Tesla will build a new factory in Mexico

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

Mexican President Andres Manuel Lopez Obrador said the facility for the electric car company would be in Monterrey, which is about a three-hour drive from Texas.

Tesla is expected to share more in its presentation to investors on Wednesday.

Mexico had previously raised concerns about how water demand from the factory could affect the region.

But Lopez Obrador said he had won commitments from Tesla CEO Elon Musk that had helped ease those concerns.

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

“This will represent a significant investment and many, many jobs,” Lopez Obrador said at a news 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 to tackle climate change last year.

But the rules provide exceptions for Canada and Mexico, which has seen its role in auto manufacturing grow as American firms look outside the country to cut costs.

This will 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 “over $5 billion” and that the factory would produce about one million vehicles per year.

Another unnamed Mexican official told Reuters news agency that the facility would be a Tesla “gigafactory” that would produce vehicles including its truck and sports car.

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

Tesla, like other car manufacturers, expects that purchases of electric cars will grow rapidly in the coming years as drivers switch to greener forms of transport.

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

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