In front of a pile of cement blocks, with the sun in his eyes, Nuevo León Governor Samuel García posed for the cameras at what will be a computer factory. The Noah Itech company is one of several technology companies supplying Tesla, the pioneer of electric cars worldwide, and which officially celebrated its arrival in Mexico with this ceremony last January. “This announcement serves me for three reasons,” García said at the Vynmsa Industrial Park, “one to confirm that they have invested in the best state to invest in; second, the obligation to carry out all public works necessary to have the best infrastructure; and third, never stop showing Nuevo León to the whole world”. His offer goes beyond rhetoric. In addition to legal guarantees, García offers foreign companies settling in his state to cross one of the border bridges without paying tolls. Nuevo León shall bear these costs.
The arrival of Noah Itech is part of a domino effect unleashed by Tesla in late 2021 when CEO Elon Musk managed to move its operations from Palo Alto, California to Austin. One of the great incentives Texas offers to businesses is low taxes. In this country, as in Mexico, states compete for investments from companies that create jobs and provide as much impetus as possible. Tesla’s resources are among the most sought-after as it is a proprietary technology company that employs well-trained, innovative professionals at competitive salaries.
From 2021 to now, many of the companies that supply and supply Tesla as part of its value chain have also moved near the new Texas facility. This created opportunities south of the border in Nuevo León, where labor is cheaper than in the United States and infrastructure is relatively good. When Musk announced plans to open a massive new factory in August last year, Nuevo León emerged as a viable option. According to local media, the construction of the factory required an area of 800 hectares and an investment of more than 10,000 million dollars in different phases. Following a discreet visit by Musk to the capital, Monterrey, in October last year, the governor asked the media for “patience” when he asked about Tesla’s potential investment in the state, saying he could not comment on the matter.
Now the story of the possible Tesla factory in Mexico has entered the political arena. First, the spokesman for the presidency, Jesús Ramírez, told Portal on January 31 that Tesla was considering building a site near one of President Andrés Manuel López Obrador’s emblematic works, Felipe Ángeles International Airport (AIFA). . Portal also quoted a government official in its report as saying that he was shown the website but the company gave no information about its plan.
This Wednesday, when asked about Tesla, President López Obrador briefly confirmed competition between states for the investment. “As I’ve been informed, there are two options, that it will be installed in Nuevo León or in Hidalgo, very close to Felipe Ángeles Airport.” It’s unclear that Tesla would benefit from being close to an airport. In Nuevo León, the company already has an exclusive lane on the Colombian border bridge, and the state government has offered it a second lane as part of the stimulus package, according to a source with knowledge of the negotiations.
Hidalgo Minister of Economic Development Carlos Henkel Escorza has confirmed that they have been in touch with Tesla executives to lure this mega-asset onto their territory. Although the official cannot share the details of the negotiations for confidentiality reasons, he has confirmed to EL PAÍS that the company has been offered inducements and that they expect a response no later than next April. “I can’t go into more details, but there will always be incentives for any company that comes to our state to invest, for us blowing up the industrial zone is very important. Today we have very important connectivity networks and the creation of the new Felipe Ángeles airport and the decree that our President López Obrador has just issued for the cargo for the Felipe Ángeles puts us in a position where the logistics problem is experiencing a major boost will be our state.” , refers.
Henkel Escorza also guarantees they have the power and land necessary to house a mega investment like Musk. “Today we have a property of more than 900 hectares in the municipality of Zapotlán de Amores and 600 hectares in the Platah Industrial Park and with the great communication routes to Mexico City, progress is being made in the electrical infrastructure, which gives us the opportunity to welcome large companies “, he adds. Asked if the distance from the northern border is a disadvantage compared to other proposals such as Nuevo León, the secretary assures that the company’s analysts will have the final say.
The Trump background
What the Mexican Presidency has done in making this competition for investment public is to give visibility to a bid that normally takes place behind closed doors, and López Obrador is not the first President to do so. In 2016, then-President Donald Trump criticized automaker Ford for wanting to open an assembly plant in Mexico that would have created 700 jobs. Under pressure from the President, Ford canceled its plans in Mexico and announced the opening of a plant in the state of Michigan.
José Zozaya, Executive President of the Mexican Automobile Industry Association (AMIA), celebrates the regional competition that has been sparked inland to win this mega-investment in his territory. “Competition between states forces them to be more efficient and more respectful of the rule of law,” he comments.
The AMIA leader acknowledges that despite the competitive advantages the country already has to attract these types of projects, such as its strategic geographic location, infrastructure and skilled workforce, the government is still working on greater support for investment, incentives and Guarantees must work inputs such as electricity. “In some regions of the country, I’ve been told of some cities where they’re not getting another plant because they don’t have electricity capacity, but it’s important that Mexico continues to increase its electricity generation capacity. The government should be much more investment promoter with more incentives. It’s unfortunate that we see some works have gone to the US despite considering Mexico,” he said.
For Fernando Turner, general manager of Katcon, an exhaust systems and catalytic converters manufacturer in Nuevo León, there are still open questions for the federal and local governments to consider whether or not to land in Mexico. The biggest delays, he warns, are related to the availability of funding, the lack of high technology policies and major infrastructure, including at that last point of electricity supply. “The CFE is in charge of power transmission and businessmen fear there will be no power, which would remove many doubts from investors. Currently there is still electricity, but there are concerns about whether there will be supply for all in the future,” he comments. As industry leaders place bets on where the world’s second richest man’s new plant will be in Mexico, he declined to comment on the project.
Musk is now in a difficult position: If he goes ahead with his plans to settle in Nuevo León, he could irritate López Obrador, a president who regularly criticizes foreign and local companies at his daily press conferences. Management consultants have warned for years that this practice is hardening the business climate and creating distrust among investors. Tesla aims to increase its production by 20 million electric vehicles by the end of the decade, which will require the installation of around eight mega-plants, and Mexico is committed to that ambitious goal.
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