Elon Musk's electric carmaker Tesla will open a plant in northern Mexico, making a significant investment in the Latin American nation, Mexican President Andres Manuel Lopez Obrador announced Tuesday.
The move, which has yet to be confirmed by Tesla, would be a major boost to Mexico's hopes of benefiting from U.S. companies choosing nearby countries over Asia for their manufacturing operations.
"The plant is going to be established in Monterrey," Lopez Obrador told reporters after speaking with Musk.
The factory was expected to be "very big" and would bring "a considerable investment and many jobs," he added.
He said the U.S. company had promised to address the problem of water scarcity in Monterrey, an industrial powerhouse home to transnational firms a few hours' drive from the U.S. border.
Musk "was very receptive, understanding our concerns," with measures expected to include the use of recycled water, Lopez Obrador said.
Tesla, which already has plants in China and Germany, as well as the United States, would announce more details soon, he added.
The company is due to hold its 2023 Investor Day on Wednesday, live-streamed from its gigafactory in the U.S. state of Texas.
Mexico declared a drought emergency in July last year, and authorities in parts of the country, including Monterrey, were forced to ration water use due to depleted reservoirs.
At the same time it hopes to benefit from the "nearshoring" trend of U.S. companies moving their production closer to home instead of to Asia.
Last year, the Latin American nation was invited by the United States to join a multi-billion dollar push to boost semiconductor manufacturing to compete with China.
Mexico sees its lithium deposits as central to its goal of playing a major role in production of batteries for electric cars and other technology.
Last year, lawmakers approved a plan to put exploration and mining of the metal under state control.
The auto industry is already a key pillar of the Mexican economy -- the second-largest in Latin America behind Brazil -- home to U.S., European and Asian manufacturers.
Mexico is the world's seventh largest automobile producer with the production of three million vehicles in 2021, according to the latest available figures from the Mexican Automotive Industry Association.
The automotive industry represented 3.5% of gross domestic product (GDP) and 930,000 jobs in 2021, with foreign investment in the sector amounting to $5.3 billion that year, according to the organization
German manufacturer BMW recently announced a $870 million investment to produce electric cars in Mexico.
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