The plant for the manufacturer of electric vehicles will be located in Monterrey, which is just a three-hour drive from Texas, according to Mexican President Andres Manuel Lopez Obrador.

In its investor presentation on Wednesday, Tesla is anticipated to provide more information.

Mexico had previously expressed worries over potential regional effects of the factory's water demands.

Yet, Mr. Lopez Obrador claimed he had secured promises from Tesla CEO Elon Musk that had allayed such concerns.

While US-China tensions undermine established supply channels, Mexico is attempting to portray itself as a winner.

"This will represent a considerable investment and many, many jobs," Mr Lopez Obrador said at a news conference on Tuesday.

Under a large expenditure plan enacted last year to combat climate change, US President Joe Biden emphasised made-in-America criteria for cars to qualify for new subsidies.

But, the regulations make an exception for Canada and Mexico, whose contribution to the auto industry has increased as American companies go to other countries for cost-saving measures.

Tesla has constructed facilities in China and Germany, making this the company's third factory outside of the US.

According to Reuters, the newest Tesla factory required an initial investment of $1 billion, which might increase to $10 billion over time.

A deputy foreign minister from Mexico, Martha Delgado, told Milenio Television that the investment was "in excess of $5 billion" and that the facility would produce roughly one million cars annually.

A second anonymous Mexican official told Reuters that the facility would be a Tesla "gigafactory" that would create their truck and sports car, among other types of cars.

When contacted for comment regarding its most recent expansion, the company did not provide any.

Tesla, like other automakers, believes that as consumers switch to more environmentally friendly modes of transportation in the next years, the market for electric cars will expand quickly.

Only a few weeks ago, BMW announced that it will be investing in a manufacturing in Mexico. Now, Tesla has confirmed its ambitions. Moreover, Ford produces its electric SUV in the country.

The United Auto Workers trades union referred to General Motors' intention to develop a plant for electric cars in Mexico as a "slap in the face" when it was announced last year.

The investments in Mexico have drawn considerable attention as a test of the business-friendly environment under Mr. López Obrador, a left-wing populist who was elected in 2018.