Tesla Inc's (TSLA.O) quest to build its first factory in Mexico reveals some of the shaky fundamentals of the country's rise as a nearshoring darling.
Mexican President Andrés Manuel López Obrador said Nuevo León, on the US border, and Hidalgo, in central Mexico, are the two states leading the race for the coveted investment, and his foreign minister said Friday that The electric vehicle maker headed by billionaire Elon Musk was close to announcing expansion plans in Mexico.
Elsewhere, Tesla will rely on the federal government to take advantage of Mexico's tight energy supply and will face difficulties obtaining substantial power from renewable sources.
That puts the Austin, Texas-based company, and any other major investors looking to build factories in Mexico, at the mercy of political forces dictated primarily by López Obrador. The nationalist leader has given priority to Mexico's state power company, CFE, despite criticism that its fossil fuel turbines pollute and displace the private company.
Musk's interest in investing heavily in Mexico comes as the country is increasingly seen as a nearshoring hotspot: the trend to move production closer to North American buyers and away from Asia, where the grunts of the supply chain during the pandemic eclipsed the region's low incomes. cost advantage.
With its low costs and its location next to the US market, Mexico has emerged as an attractive alternative that is gradually attracting manufacturing in sectors including automobiles, electronics and furniture.
In another recently announced deal, Germany's BMW (BMWG.DE) will invest nearly $870 million in the central state of San Luis Potosí to produce high-voltage batteries and electric cars.
Foreign direct investment in Mexico increased 12% last year to reach $35.3 billion, according to preliminary data, another sign that nearshoring is gaining momentum, analysts say.
o Across the border, in another sign of the trend, US manufacturing imports from Mexico increased 7% in 2021 compared to 2019, the fastest pace in a decade.
López Obrador reversed a reform from his predecessor that he said was too generous in opening up the energy market to private capital. It has suspended self-supply power generation permits, which allowed companies to organize their own electricity supplies, and also hampered attempts by private companies to connect their power production to the national grid.
Source: Yahoo News
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