BREAKING NEWS: Tesla plant gets green light in northern Mexico [10 billion investment in total]
Tesla plant gets green light in northern Mexico
MEXICO CITY, Feb 28 (Reuters) - Tesla Inc (TSLA.O) will build a new plant in northern Mexico, the country's president said on Tuesday, marking a push by the electric vehicle maker to broaden operations outside the U.S. in a deal said by a source to be worth at least $1 billion.
Without giving details, President Andres Manuel Lopez Obrador said "the whole Tesla company" was coming to Mexico, calling it an "automotive plant" that would be "very big" and noting that potential investment in batteries was still pending.
The new factory would make automobiles, two Mexican officials said. One of them said it was expected to produce a kind of sport utility vehicle. The Model Y is Tesla's best-selling SUV.
Lopez Obrador's announcement of the plant in the Monterrey metropolitan area dispelled recent concerns that he could upend the investment by imposing conditions on the company due to problems over a lack of water in the arid border region.
"This will represent a considerable investment and many, many jobs," Lopez Obrador told reporters, saying Chief Executive Elon Musk had been receptive to Mexico's concerns and accepted its proposals.
The initial investment will be worth around $1 billion and further phases could bring total spending to $10 billion, according to a Mexican source with knowledge of the matter.
Tesla did not reply to a request for comment.
The company has car factories in California and Texas in the United States, Berlin in Germany and Shanghai in China.
Musk has said for months that the EV maker will announce a new factory, and he is set to discuss expansion plans, next-generation vehicle platforms and other topics at an "Investor Day" event on Wednesday.
The news is a boost for Mexico, which is working to establish itself as a hub for the so-called nearshoring of investment - capitalizing on geopolitical tensions and supply- chain disruptions caused by the COVID-19 pandemic by luring manufacturing capacity to North America, and away from Asia.
Lopez Obrador said Mexico and Tesla had reached agreement after a call with Musk on Monday, following a separate conversation he said the two held late last week.
The plant will be built in Santa Catarina in the greater Monterrey area, said the municipality's mayor, Jesus Nava, echoing reports that have circulated for weeks.
"Santa Catarina will have the eyes of the world," he said on Instagram. In another video, captioned "10 billion dollars" in bright red, Nava said Tesla's investment would be five times the private investment in the municipality over the past decade.
Mexican Foreign Minister Marcelo Ebrard hailed the news on Twitter, calling it the result of 14 months of "patient labor."
Mexican-made electric cars shipped to the United States qualify for subsidies provided by the Biden administration to boost EV adoption, according to industry officials.
WATER CONCERNS
The call between Musk and the Mexican president took place after Lopez Obrador had on Friday stirred fears he might block the investment in Monterrey if water was scarce there.
The president said Musk had understood the challenge posed by water scarcity, and that the company would be making a series of commitments as part of the deal.
The discussions around Tesla have been a major test of how investors responded to Lopez Obrador's resource nationalism, which has sparked misgivings among business groups.
Although the Tesla matter appears resolved, the episode sent a message to investors that they may not be able to push through projects without Lopez Obrador's personal approval, said Ana Moreno, an analyst at think tank Mexico Evalua.
"It could happen with other kinds of investment that in some way touch or clash with the president's agenda," she said.
Speculation about Tesla going to Mexico has circulated for months, and the plant promises to be one of the major investments of the Lopez Obrador administration.
Mexico recorded its highest foreign direct investment for years in 2022, as businesses took advantage of a lower-cost and skilled work force as well as its free trade deal with the U.S. that has made the country a global center of the car industry.
However, overall investment has been held back by companies unsettled by Lopez Obrador's efforts to strengthen state control of the energy market at the expense of private capital.
Tesla Inc will build a new assembly plant in northern Mexico, the country's president announced on Tuesday, marking a push by the electric vehicle maker to broaden operations outside the U.S. in a deal an official said was worth over $5 billion.
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