Mexico: States in fight to receive a possible Tesla factory

MEXICO CITY (AP) — Several Mexican states are locked in an intense competition to be the site of a Tesla facility, a struggle reminiscent of what happens in cities and states across the United States trying to be chosen by technology companies willing to invest.

The governors of these Mexican states have resorted to extreme measures, including contracting for billboards on highways, creating vehicle-only lanes or drafting announcements from electric car manufacturers. for their states.

And there’s no guarantee that Tesla will build a fit factory. Nothing has been announced. The frenzy is mainly based on the fact that the Mexican authorities have said that its CEO Elon Musk will soon speak by telephone with President Andrés Manuel López Obrador.

The industrial state of northern Nuevo León seemed to have a head start in the contest. Last summer he painted the Tesla logo on a lane on the Colombian border to Texas, and in December he put up signs in Monterrey, the state capital, reading “Welcome Tesla” in English.

The governor’s wife, Mariana Rodríguez, even appeared in leaked photos during a meeting with Musk.

However, López Obrador appeared to rule out the semi-desert state on Monday, saying he would not allow what is often high water consumption by factories, risking shortages there.

This sparked intense competition between other states in Mexico, similar to what happens when you feed piranhas in a water tank. Among the offers from the governors, there were some very well-crafted proposals and others with a certain comic air.

“The only state that has excess gas is Veracruz,” said Cuitláhuac García, governor of that state with a coastline on the Gulf of Mexico, and quickly added, “…for industrial use, for industrial use.

García arrived late for the tender and had to try harder: he pointed out that Mexico’s only nuclear plant is located in Veracruz. Furthermore, he claimed that the state owns 30% of the country’s drinking water, although the National Water Commission claims that figure is actually 11%. Apparently in Mexico the availability of water is a crucial point to take into account.

For his part, the governor of the western state of Michoacán, Alfredo Ramírez Bedolla, did not want to be outdone. He quickly posted a sketch of a Tesla ad in which a Tesla vehicle appears next to a car-sized lawyer – the most internationally recognized state product – along with the phrase: “Michoacán, the best option for Tesla”.

“We have enough water,” Ramírez Bedolla said in a television interview he gave between meetings with automotive industry figures and representatives of international companies.

Michoacán also has a thorny problem of violence generated by drug cartels. However, the neighboring state of Guanajuato suffers from the same situation, which has not prevented several major international car manufacturers from setting up factories there.

Samuel García, Governor of Nuevo León, had to think quickly to avoid being completely excluded from the tender, and he came up with a new strategy.

Garcia contacted the western state of Jalisco, whose governor, Enrique Alfaro, also belongs to the small Movimiento Ciudadano party. Both proposed an “alliance” on Thursday that would allow trucks from Jalisco to preferentially use the Nuevo León border crossing, the very one where a “Tesla” lane was established last year.

Jalisco already has a healthy foreign technology sector, and more importantly, it has more water than Nuevo León.

The two seemed to have a cooperative attitude. “We are two states that don’t have to compete and cannibalize each other… cannibalizing in the fight for investment is wrong,” Alfaro said.

López Obrador’s focus on water may be more of a political issue than drought, said Gabriela Siller, chief economist at Nuevo León-based Banco Base. He pointed out that the president seems to be trying to direct Tesla’s investments to a state governed by his Morena party, such as Michoacán or Veracruz.

It could be a dangerous game, Siller warned.

“Tesla can say he’s not a doll that they take him anywhere, but he decides, and he can decide not to go to Mexico,” he said.

Sam Abuelsamid, research analyst at US-based Guidehouse Insights, said pitting one state against another was common practice in the United States.

“You remember a few years ago Amazon talked about building their headquarters, and as every state and city in the country made a bid, trying to get Amazon there,” Abuelsamid noted.

There are doubts that whatever Musk will eventually announce will be an auto assembly plant. Mexican Foreign Relations Secretary Marcelo Ebrard said that to his knowledge it would not be a factory, but rather an “ecosystem” of suppliers.

Musk has made promises in the past that either don’t materialize or come years after he said they would. For example, in 2019 it promised that a fleet of fully autonomous robots would hit the road starting in 2020. Almost three years later, Tesla still hasn’t sold any autonomous vehicles.

Although little has been said in Mexico so far about subsidies, many automakers have received significant incentives to build factories in the country. These types of attempts to secure your arrival can be costly.

“It’s debatable whether it’s really economically advantageous for the localities, or to provide these subsidies,” Abuelsamid said. “Sometimes they spend millions of dollars in tax breaks to entice a company to stay there.”

Musk has occasionally floated the idea of ​​building a $25,000 electric vehicle that would cost about $20,000 less than the Model 3, currently Tesla’s cheapest car. Many automakers build affordable models in Mexico to save on labor costs and protect profit margins.

A Tesla investment in Mexico could be part of “nearshoring” by U.S. companies that previously manufactured in China but are now wary of logistical and political issues there. The fact that these companies are setting their sights on the Latin American country represents its best hope of attracting foreign investment.

“The fight to attract the investments that this phenomenon of ‘nearshoring’ will generate will be hard, complex between the States”, declared Alfaro.

Ramírez Bedolla summed it up: “Where Tesla would go would be great news.”