Tesla Will Build New Plant In Mexico, Mexican President Says

(Photo by Dean Mouhtaropoulos/Getty Images)

Mary Rooke Commentary and Analysis Writer
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Elon Musk has reportedly brokered a deal with Mexican President Andrés Manuel López Obrador to build a new Tesla plant in Monterrey, Mexico, the president announced Tuesday.

López Obrador permitted Musk to build the new plant in northern Mexico after phone calls between Mexico’s president and the Tesla CEO calmed fears over how the country would supply enough water to the massive factory campus, AP News reported.

Monterrey is located in Nuevo Leon, an area of northern Mexico that suffers water shortages, including in 2022, when millions of homes went weeks with inconsistent or no access to water. Mexico is constructing a 60-mile pipe from a dam to Nuevo Leon to help ease water supply issues in the region, according to AP News.

López Obrador initially refused Musk’s proposal because the massive water consumption expected for the campus would exasperate the current issues. He later accepted the deal after Musk promised to implement water conservation policies at the factory, the outlet reported.

“There is one commitment that all the water used in the manufacture of electric automobiles will be recycled water,” the president said.

It’s unclear how big of an investment or how many jobs the Tesla plant will bring to Nuevo Leon, but López Obrador said he believes it will be substantial, the AP reported. (RELATED: EXCLUSIVE: Gov. Youngkin Pulls Virginia From Location Consideration In Chinese Deal With Ford)

“This is going to mean a considerable investment and many, many jobs. My understanding is that it will be very big,” he said.

Gabriela Siller, chief economist at Mexican financial group Banco Base told AP News that Tesla could invest as much as $10 billion through this deal, making it politically impossible for Mexico’s president to deny Musk’s proposal.

“[He] could not turn this down,” Siller said. “It would have had a very big political cost for him.”

Tesla’s Mexico plant will be the third factory Musk has built outside the U.S. to help make parts for his American car company, but the first since the U.S. Congress passed the Inflation Reduction Act (IRA). Musk could forgo billions in new clean energy manufacturing credits made available through the IRA.

In December, Republican Virginia Gov. Glenn Youngkin removed Virginia from consideration as the location of a manufacturing plant in an ongoing deal between Ford Motor Co. and a Chinese battery manufacturer, Contemporary Amperex Technology Co. Ltd. (CATL). Youngkin has “major concerns” about CATL’s ties to the Chinese government, including an agreement that would allow CATL to benefit from the IRA, a source familiar with the negotiations told the Daily Caller.

Virginia Gov. Glenn Youngkin, Republican Florida Sen. Marco Rubio, and Republican Ohio Sen. J.D. Vance did not respond to the Daily Caller’s request for comment on how Tesla’s plans to build in Mexico over the U.S. will affect Americans during a period where real wages are declining.