Tesla’s Mexican factory is likely to require a $10 billion investment in stages, which will be a game-changer for the state of Nuevo Leon, where it will be located, as global companies scramble to move north, Governor Samuel said Garcia.
Tesla chose Nuevo Leon, Mexico’s industrial cluster center near the Texas border, because of its lower costs, labor availability and presence of key parts suppliers, beating out competitive bids from Germany, the Netherlands, Colombia and Indonesia, among others, it said. Garcia in an interview. The announcement will serve as an anchor to attract more foreign investment, he said.
“This is a tipping point in the transition from the traditional industry to an industry of the future, a green industry,” Garcia said via video from his office in Monterrey, the capital of Nuevo Leon, some 140 miles from the US border. “It will transform our state and break all economic records.”
At its investor day earlier this week, Tesla confirmed the launch of a new Gigafactory electric vehicle to be built on the outskirts of Monterrey, but gave few details about the project’s strategy or scope. The company has invested approximately $28 billion globally to date and is expected to spend between $150 billion and $175 billion to reach its target of 20 million cars per year.
CEO Elon Musk previously said a vehicle development team is working on a next-generation platform that would cut the Model 3’s construction costs in half. Tesla did not respond to a request for comment sent after business hours on Thursday.
business euphoria
Mexico’s investment announcement, first made by President Andrés Manuel López Obrador, has sparked euphoria in his country’s business and political circles as it is seen as a symbol of the country’s manufacturing capabilities in the post-pandemic world.
With China hit by US tariffs and geopolitical tensions between the world’s two largest economies, many companies are looking to move from Asia and Europe to Mexico, a process commonly known as nearshoring, to take advantage of the latest Profit North – take advantage of the US Freedom Trade Agreement, or USMCA, and export to the US market from a shorter distance.
Tesla’s initial spending on the plant will be between $5 billion and $6 billion in a first phase, before likely reaching a $10 billion investment in several phases, the governor said.
Garcia, 35, also said he was in talks with other multinationals to make “major investments” in Nuevo Leon and declined to give details. Foreign investment in the state will triple this year to a whopping $12 billion, from more than $4.3 billion in 2022, he said.
“USMCA is a boon to Mexico,” Garcia said, noting that the tariffs imposed on Chinese exports under the Donald Trump presidency represented a “tipping point” for companies to return to North America. “A lot of near-horn came to Nuevo Leon.”
The effects of the growing demand are already being felt and some industrial estate managers say they no longer have room to set up new projects. Garcia downplayed the concerns, saying parts suppliers would have no problem finding additional space in Nuevo Leon, where there is plenty of land.
Tesla’s arrival in Mexico could generate about $15 billion in new exports to the US, a 3.5% increase as the EV ecosystem evolves, according to a Morgan Stanley research note. A surge in manufacturing investment aided by the U.S. Inflation Reduction Act could boost total exports by $80 billion to $150 billion within five to six years, the note released Thursday said.
Nuevo Leon, one of Mexico’s top destinations for foreign companies, already has a border road near Laredo, Texas, specifically for Tesla suppliers who arrived in the region before the official investment announcement, Garcia said.
During the interview, Governor López Obrador dismissed concerns about water shortages after last year’s drought nearly drained Monterrey. A water treatment plant will provide Tesla with the 80 gallons of water per second it needs, which is a small fraction of the state’s capacity, Garcia said Thursday.
Critics, including environmental groups, continued to raise concerns about the lack of long-term planning for the area’s water supply and the negative impact shortages could have on residents.
A rising star in Mexican politics, Garcia surprised by winning Nuevo Leon’s 2021 state election at just 33 years old, thanks in part to his clever use of social media, including Instagram, and his anti-old political message. Now Tesla’s arrival in Nuevo Leon is giving him national media attention.
“Tesla symbolizes what it is,” he said. “Then you look at the amount and say that’s not just symbolic, that’s historical.”
Source: LA Times