“There is one commitment that all water used in electric car production will be recycled water,” said López Obrador.

López Obrador did not specify the size of the investment or what the plant would produce, noting that the company planned to release more details on Wednesday.

But he said, “This is going to mean a significant investment and a lot of jobs.”

“I understand it will be very big,” López Obrador said, but it was unclear whether the factory would produce batteries, noting that “the batteries are still pending.”

Tesla already has two factories outside the United States, one in Shanghai and one near Berlin.

Highly industrialized and close to the US border, Monterrey has long been considered the frontrunner for any Tesla investment.

But the city experienced such severe water shortages in 2022 that many homes in 2022 went without or intermittently for weeks. The government is building a 100-kilometer pipeline to draw more water from a dam to increase supply.

López Obrador had previously said his government “simply will not grant permits” for new factories there. But apparently Musk’s proposal overruled the president’s position.

The announcement came as a disappointment to more water-rich southern states that began jockeying for the Tesla plant after López Obrador’s comments last week.

The governor of the state of Nuevo Leon, where billboards posted last year read “Welcome Tesla,” crowed about Tuesday’s announcement.

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

Musk has sometimes floated the idea of ​​building a $25,000 electric vehicle that would cost about $20,000 less than the current Model 3, now Tesla’s cheapest car. Many automakers are building cheaper models in Mexico to save on labor costs and protect profit margins.

López Obrador said Mexico would not match US subsidies to win the Tesla plant, citing US incentives under the Inflation Reduction Act of 2022.

“We cannot give such a subsidy,” the president said, adding, “Mr. Musk was very considerate and respectful of Mexico’s position.