Month: March 2023

Mexico’s president announced Tuesday that electric car company Tesla has committed to building a major plant in the industrial hub of Monterrey in northern Mexico.

President Andrés Manuel Lopez Obrador said the promise came in phone calls he had Friday and Monday with Tesla head Elon Musk. It would be Tesla’s third plant outside the U.S., after one in Shanghai and one near Berlin.

Lopez Obrador had previously ruled out such a plant in the arid northern state of Nuevo Leon, where Monterrey is the capital, because he didn’t want water-hungry factories in a region that suffers water shortages. But he said Musk’s company had offered commitments to address those concerns, including using recycled water.

“There is one commitment that all the water used in the manufacture of electric automobiles will be recycled water,” Lopez Obrador said.

The president said it would be a large investment without giving a dollar amount and did not specify what the plant would produce. He said it was unclear if it would produce batteries, an industry Mexico desperately wants despite not having a current domestic supply of lithium.

Lopez Obrador said the company planned to release details on Wednesday.

“This is going to mean a considerable investment and many, many jobs,” he said. “My understanding is that it will be very big.”

Investment estimated to be $10 billion

Monterrey is highly industrialized and close to the U.S. border and had long been considered the frontrunner for any Tesla investment.

But the city suffered water shortages in 2022 that were so severe that many homes went weeks with intermittent or no water supply. The government is building a 100-kilometer pipeline to bring in water from a dam.

Lopez Obrador had previously said his government “simply won’t grant permits” for any new plants there. Apparently Musk’s proposal overrode the president’s stance.

Gabriela Siller, chief economist at Nuevo Leon-based Banco Base, said the Tesla investment — which she estimated could be worth $10 billion — represented such a large amount that it trumped any of the president’s objections.

Lopez Obrador “could not turn this down. It would have had a very big political cost for him,” said Siller.

The announcement was a disappointment for more water-rich southern states that had begun jockeying for the Tesla plant after Lopez Obrador’s comments last week.

‘WE ALL WIN!’

The governor of Nuevo Leon state, where billboards went up last year saying, “Welcome Tesla,” crowed about Tuesday’s announcement.

“Mexico won, Nuevo Leon (NL) won, WE ALL WIN!” Governor Samuel García wrote on his Twitter account.

Lopez Obrador said Mexico wouldn’t match any U.S. subsidies to win the Tesla plant, referring to U.S. incentives under the 2022 Inflation Reduction Act.

“We cannot give subsidies like that,” the president said, adding “Mr. Musk was very attentive, respectful” of Mexico’s position.

Tesla is expected to announce plans for its “Gen 3” vehicle platform on Wednesday at its annual investor day at a factory near Austin, Texas.

Musk previously has floated the idea of building a $25,000 electric vehicle, which would cost about $20,000 less than the current Model 3, now Tesla’s least-expensive car. Many automakers build lower-cost models in Mexico to save on labor costs and protect profit margins.

Musk also is expected to show off the company’s production line at the Austin plant, as well as discuss long-term expansion plans, how it will spend capital investment dollars, and other subjects.
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The Biden administration approved more than $23 billion worth of licenses for companies to ship U.S. goods and technology to blacklisted Chinese companies in the first quarter of 2022, a Republican lawmaker said Tuesday.

The data comes amid growing pressure on the administration of Democratic President Joe Biden to further expand a broad crackdown on shipments of sensitive U.S. technology to China from Republican lawmakers, who now control the House of Representatives.

“Overwhelmingly, [the Commerce Department] continues to grant licenses that allow critical U.S. technology to be sold to our adversaries,” Republican Representative Michael McCaul, chair of the House of Representatives Foreign Affairs Committee, said at a hearing on combating the generational challenge of Chinese aggression, as he grilled U.S. officials for allowing the licenses to be approved.

“How does this align with your statement that ‘we’re doing everything within [the Commerce Department’s] power to prevent sensitive U.S. technologies from getting in the hands of [Chinese] military, intelligence services or other parties?’”

McCaul said the Commerce Department, which oversees export controls, denied only 8% of license requests to sell to companies on the U.S. trade blacklist during the January to March period last year.

Commerce Department official Alan Estevez, who oversees U.S. export policy, told the hearing that a Trump-era policy that allows China’s blacklisted telecommunications equipment maker Huawei to receive some U.S. technology below the “5G level” is “under assessment.”

Estevez also described TikTok as a “threat,” noting that a powerful committee that reviews foreign investments in the United States was dealing with how to handle the popular Chinese-owned social media app.

TikTok said in a statement the company has been working with the Committee on Foreign Investment in the United States “for over two years on a plan to address national security concerns about TikTok in the U.S.”

Democratic Congressman Gregory Meeks cautioned against reading too much into the licensing numbers, noting that the approval and denial data provides no information about the transactions.

The data comes a week after the Biden administration added new Chinese companies to the trade blacklist for aiding Russia’s military and months after announcing a sweeping new policy aimed at dramatically curbing shipments of chips and chipmaking tools to China.

Chinese tech giant Huawei Technologies Co. Ltd. was added to a trade blacklist known as the entity list by former Republican President Donald Trump in 2019, amid allegations of sanctions violations, spying capabilities, and intellectual property theft.

Suppliers of most companies added to the entity list see their requests to ship to the targeted firms denied, but the Trump administration implemented a special policy for Huawei, pledging to deny it access to some things like 5G chips but allow it to receive other items, such as 4G chips.
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