Tesla plans gigafactory in first Mexico investment

© Reuters. FILE PHOTO: The logo of Tesla is seen at a Tesla Supercharger station October 21, 2020. REUTERS/Arnd Wiegmann

MEXICO CITY (Reuters) -Tesla will open a gigafactory in Mexico, Chief Executive Elon Musk said on Wednesday, as the electric vehicle behemoth pushes to expand its global output.

Mexico on Tuesday said Tesla (NASDAQ:TSLA) had chosen the northern border state of Nuevo Leon for a new factory worth more than $5 billion, calling it the "the biggest electric vehicle plant in the world".

Tesla will ramp up output at all of its gigafactories, Musk said at an Investor Day event Austin, Texas. The company laid out plans to cut assembly costs by half in future generations of cars and discussed its innovation in managing operations from manufacturing to service.

The plant near the city of Monterrey "will be supplemental to the output of all the other factories," Musk said at the end of the more than 3-hour long presentation, calling it "probably the most significant announcement of the day."

Tesla's global capacity was 2 million vehicles a year, Tom Zhu, the new global production chief, said at the event.

Musk's annoucement was Tesla's first public statement about its plans for Mexico after months of speculation and phone calls between Musk and Mexican President Andres Manuel Lopez Obrador.

Musk did not provide details of how many vehicles the factory would produce in a year and Tesla's investment in it.

The company's other plants are in the U.S., Germany and China.

The project marks the biggest in a string of recent EV investments in Latin America's second-largest economy.

Before Tesla, BMW, General Motors (NYSE:GM) and Ford all recently announced plans to begin or step up EV production in Mexico as automakers transition away from fossil fuels.

Tesla will create up to 6,000 jobs in Nuevo Leon and is considering producing batteries in the center of the country as the electric vehicle maker eyes further investment, senior Mexican officials said.

MORE INVESTMENT

"(Musk) is interested in investing more in Mexico," Lopez Obrador said on Wednesday ahead of Musk's presentation, noting the two had discussed the government's plans to develop the Isthmus of Tehuantepec in southern Mexico.

Speaking at a news conference, Lopez Obrador said he had invited Musk to visit and would like him to tour the northern state of Sonora, where the government is building a solar energy park and pushing for state-run lithium production.

"I told him lithium has been nationalized, but that doesn't mean we can't come to an agreement," he said.

Tesla selected Nuevo Leon for its plant due to its proximity to Austin, where it has its headquarters, said Martha Delgado, a deputy foreign minister.

The factory will employ 5,000 to 6,000 people, she added, noting that similar Tesla plants employ up to 10,000.

The company had also visited the central states of Hidalgo, Queretaro and Puebla, areas that could be options for electric battery production, Delgado said.

Guillermo Rosales, executive president of the Mexican Association of Automotive Distributors, welcomed the project.

"Generation of employment, consolidation and development of suppliers; as well as the level of confidence that it provides for the decision-making of other players in the automotive industry to invest in Mexico are some of the benefits," Rosales said.