Nuevo León, which recent reports suggest is the most likely destination, boasts quick access to the United States, a skilled labor force and a comfortable life for executives.
Hidalgo, next to Mexico City, is hundreds of kilometers from the border, but land and labor costs are less.
In any case, Tesla will depend on the government to take advantage of Mexico’s unstable electricity supply and will face difficulties obtaining substantial power from renewable sources.
That puts the Austin-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 state priority to the Federal Electricity Commission (CFE) despite criticism that its generation, mainly based on fossil fuels, contaminates and displaces private companies.
The United States and Canada have formally entered into a trade dispute over Mexico’s energy policy.
Many analysts also say that the government seems to have tried to tip the balance in favor of Hidalgo, a state governed by an ally of López Obrador and located near one of the president’s most emblematic projects: the Felipe Ángeles International Airport (AIFA).
“It’s very important to take political factors into account right now and this is a perfect example,” said Claudio Rodríguez, an energy lawyer at Holland & Knight. “The Nuevo León-Hidalgo issue is 100% political,” he added.
Tesla and a spokesman for the Mexican presidency did not immediately respond to requests for comment. It’s unclear exactly what Tesla’s investment in Mexico will look like and what the company plans to produce in the country.
“The development of other regions that can become industrial poles is also something that can benefit Mexico in the long term,” said Alejandra Soto, of the Control Risks consultancy. “But forcing someone (to settle in a certain place) is not positive.”
Musk’s interest in investing millions of dollars in Mexico comes as the country begins to lay claim to the spotlight as a nearshoring hotspot.
With its low costs and its location next to the US market, Mexico emerged as an attractive alternative that is gradually attracting manufacturing in sectors such as automobiles, electronics, textiles and furniture.
Many deals have landed in Monterrey – the affluent capital of Nuevo León – including suppliers to Tesla: Taiwanese electronics company Quanta Computer’s first plant outside Asia and an expansion by Italian brake maker Brembo.
In another recent agreement, the German BMW assured that it will invest 866 million dollars in the central state of San Luis Potosí to produce batteries and electric cars.
Foreign direct investment into Mexico increased 12% last year to reach $35.3 billion, according to preliminary data, another sign that nearshoring is gaining momentum, analysts say.
Change is also happening on the other side of the border. Imports of Mexican products from the United States increased 7% in 2021 compared to 2019, the fastest pace in a decade.
However, López Obrador is holding back Mexico’s ability for a nearshoring boom, especially with his energy policies, analysts say. The government holds the keys to Mexico’s power supply, with the ability to speed up or delay requests to connect to the grid.
The president reversed a reform from his predecessor that he said was too generous in opening up the energy market to private capital. He 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.
“It is striking that energy supply decisions are determined by political criteria when it should be a matter of the open market and availability for industries to draw up their business plans based on what is best for them,” said Juan Francisco Torres. , attorney for Hogan Lovells.
“Imagine what it would be like if you had a profitable investment policy, energy efficient policy, with great facilities,” he added. “We would be flying at 30,000 feet and having endless reversals, but that’s not happening.”