Ever since Elon Musk flew to Mexico to visit the northern state of Nuevo Leon in October, rumors have swirled about where Tesla Inc. will end up building its plant — and whether another state might snatch away the investment.
(Bloomberg) — Ever since Elon Musk flew to Mexico to visit the northern state of Nuevo Leon in October, rumors have swirled about where Tesla Inc. will end up building its plant — and whether another state might snatch away the investment.
President Andres Manuel Lopez Obrador weighed in on the issue this week and didn’t have anything positive to say about Tesla settling in Nuevo Leon. The state near the US border is already filled with industry and lacks water, said AMLO, as the president is known. Instead, he highlighted abundant resources in the country’s southeast and the appeal of moving close to a new airport in the State of Mexico that’s one of his major infrastructure projects.
On Friday, he reinforced the message by saying the company would not receive permits if there was not enough water in northern Mexico.
“If there is no water, no, there would be no possibilities,” AMLO said. “The permits are simply not issued for that, I mean it is not feasible.”
Meanwhile, the governor of the farming state of Michoacan, which is famous for its avocado production, posted an image on Twitter featuring a gleaming car with the popular fruit, sliced in half, sitting in front of it. “The best option for Tesla,” the image reads.
For his part, Nuevo Leon’s governor appeared in a video gifting one of the company’s vehicles to his wife for Valentine’s Day.
Tesla, the US market leader for electric cars, has been expected to announce plans for an assembly plant in Mexico since last year. The factory would be Tesla’s first south of the US border and part of Chief Executive Officer Musk’s promise to build international plants.
Read More: Tesla Expected to Announce Mexico Project Soon, Minister Says
Tesla suppliers already have a dedicated lane at a border crossing a few miles from Laredo, Texas, which shares a border with the Mexican state of Nuevo Leon. But AMLO has argued that Mexico’s north has shortcomings for the plant and said he’d raise those in an upcoming conversation with company executives. Originally from the southern state of Tabasco, AMLO has called for greater development in Mexico’s south for decades.
“Mexico as a country does not have a unified foreign direct investment strategy. Each state is independently aiming to attract companies,” said Alberto Villarreal, the founder of Chicago-based Nepanoa, a business advisory firm. “Different states are fighting to have Tesla in their territory.”
The Latin American country, which is one of the world’s largest vehicle manufacturers, has recently seen electric-vehicle investments from BMW and General Motors. It has promised to splurge on solar energy plants in the state of Sonora to supply clean energy to the region. Nuevo Leon is among the top destinations for direct foreign investment in Mexico, drawing in $4.4 billion last year, or almost 13% of the country’s total, according to a Banco Base analysis. But a severe drought in 2022 — that at times left residents without water — raised questions about the state’s limits.
“We celebrate that Mexico has become a place for these auto industry investments. The only thing we want to talk about with the executives is a way of ordering growth,” AMLO said earlier this week at the press briefing. “There are places in the country where there isn’t enough water and we have to save it for domestic consumption.”
Read More: Mexico Must Stop Making Beer in North on Drought, AMLO Says
Playing Each Other
Tesla has a long history of playing different cities and states against each other for its business. It courted states like Texas, Arizona, and New Mexico when it was searching for a home for its first so-called “Gigafactory” in 2014 before ultimately settling on Nevada, which offered $1.3 billion in tax incentives for the project.
That competition was so successful that Jeff Bezos tried to replicate it when searching for a location for Amazon’s second headquarters, Bloomberg News previously reported. Musk ran an accelerated version of the competition in 2020 after he announced he was scouting locations for a new factory to build Tesla’s Cybertruck, before ultimately settling on Texas.
More recently, Tesla told Texas officials in September 2022 that tax breaks would be crucial to the company choosing a location on the state’s gulf coast for a new lithium refinery. In that same application, Tesla said it was also considering a site in Louisiana. The company didn’t immediately respond to a request for comment on its future Mexico location.
With nothing set in stone, an open fight in Mexico could be risky for the country, potentially leading Tesla to call off the investment, said Jesus Carrillo, the sustainable economics director at the Mexican Institute for Competitiveness, a Mexico City-based think tank.
“I don’t think this debate will change the location, even though there’s an effort by the government to coerce companies where it wants. But the final decision could be to cancel, if there are too many barriers,” Carrillo said.
–With assistance from Carolina Gonzalez.
(Updates with AMLO comments on paragraph two to three)
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