A Thirsty New Tesla Factory Comes To a Parched Corner of Mexico June 27th, 2023
Via Rest of World, a look at a thirsty new Tesla factory coming to a parched corner of Mexico:
When the taps started to run dry in March 2022, Blanca Guzmán thought she was prepared. Monterrey, in northern Mexico, was in a state of emergency due to a drought more severe than in previous years, but the 76-year-old and her husband, both retired, had spent a small fortune on an 800-liter rooftop water tank. They hoped it would help them weather the crisis. Guzmán had also filled up every bottle and bucket she could find to make sure they could bathe, cook, and flush.
The water cuts, initially once a week, only got worse. Before long, the couple ran out of water.
Northern Mexico had seen exceptionally little rain for several years. Toward the middle of last year, two of the three reservoirs that supply most of Monterrey’s water were at historically low levels, and dropping. By early June, the start of the hottest season, authorities only supplied water to the 5.2 million people in Monterrey and its surrounding municipalities for six hours in the morning, if at all. Convenience stores sold out of 20-liter water bottles as people stockpiled anything drinkable — Topo Chico mineral water, fruit juice, soda, beer.
In search of more water, Guzmán and her husband would drive around the city to visit countless stores, only to find shelves emptied out. Guzmán told Rest of World the government eventually placed large water tanks in the neighborhood, but people kept their location a secret. “People drove around with their buckets and jugs but they wouldn’t tell you where they got the water for fear it would run out,” she said. “People were terrified, we felt like we were at war.” Long lines formed in the scorching sun when a tanker arrived, or when a particular water pipe came to life. “Fights broke out between people for a bucket of water,” said Guzmán.
While residents rationed their water, they noticed the city’s biggest businesses seemed to be conspicuously unaffected. In July, Guzmán took part in a protest in front of a Heineken-owned brewery, which, despite the drought, hadn’t stopped beer production. Coca-Cola, too, kept on bottling. Throughout the summer, as working-class communities sometimes went weeks without running taps, people blocked roads to demand more water. A common protest slogan pointed a finger at the government and big business: “¡No es sequía, es saqueo!” — “It’s not drought, it’s plunder!”
In October, after the water crisis had abated but the trauma had not, Tesla CEO Elon Musk visited Monterrey’s state, Nuevo León, purportedly to scout locations for a new factory. Two months later, Bloomberg had the scoop: Sources said Tesla had set its sights on Santa Catarina, a municipality on the outskirts of the Monterrey metropolitan area.
The news set off a discussion about whether Tesla’s arrival would blight or brighten Nuevo León’s future. Many in the state are enthusiastic about Tesla’s factory — an investment some government officials predict could eventually be worth around $10 billion — and think the economic benefits outweigh any downsides. A small group of residents, activists, and academics, however, is pushing back.
Nuevo León, which borders the U.S., is a quickly growing manufacturing and industrial hub, and one of Mexico’s most prosperous regions. But its economic expansion has been accompanied by a number of issues — increased traffic, air pollution, inequality — that critics fear will be exacerbated by Tesla’s arrival, and the suppliers and workers it brings in its wake.
Most of all, they fear the effects on the region’s limited and dwindling water supplies. “The influx of people and industry associated with Tesla and its suppliers could lead to a water shortage in the Monterrey metropolitan area,” Ismael Aguilar, a researcher at El Colegio de la Frontera Norte’s department of urban and environmental studies, told Rest of World. Monterrey, with its semi-arid climate, has limited water available. “The problem is that we continue to extract, extract, extract until it runs out because there is nowhere else to get more,” he said. “Is that sustainable? No.”
The conflict around Tesla’s potential water usage swelled as the company negotiated with the Mexican government. President Andrés Manuel López Obrador first said on February 20 that he believed Nuevo León was not a viable option for Tesla since “there is no water.” He implied the electric vehicle maker should choose Mexico’s southeast, which is rich in water but less of an industrial hub than the north.
Nuevo León’s economic secretary told reporters at a public event in Monterrey that there was enough water in the state for industrial use. That left Guzmán, and a small group of activists, incredulous: How could he be talking about industry when there was not enough water for residents? On a hot winter day in February, they marched through the lobby of Nuevo León’s congressional building, chanting, “Water, yes! Tesla, no!” and “Water is not for sale!”
López Obrador doubled down. On February 24, he said the federal government would not allow Tesla to settle in the state “if there is no water.”
For Tesla, it’s not the first time one of its factories has run into local opposition over water use. The company’s plant on the eastern edge of Austin, Texas, is similarly located in a fast-growing city facing drought conditions. Residents near the Austin plant have long struggled with access to clean water, and have voiced concerns that Tesla’s water needs will be publicly provided while their water is privately controlled.
Tesla’s factory near Berlin had its opening delayed after activists, concerned the plant would worsen water scarcity in the region, challenged in court the thoroughness of the company’s water permits. Though the factory was allowed to start operations in March 2022 after months of delay, its expansion and upgrade plans are currently on hold. Government agencies and environmental groups are still debating whether to supply the factory with more water. Tesla, which has no public relations department, did not respond to several requests for comment.
After two video calls with Musk, López Obrador withdrew his objections. On February 28, he confirmed Tesla was coming to Nuevo León. From the podium in the National Palace where he holds his daily morning press conferences, López Obrador said he and Musk had reached an understanding: “[Tesla] will invest in Mexico and establish a plant in Monterrey with a series of compromises to face the problem of water scarcity; they will help.” Tesla would only use treated wastewater, government officials claimed, and had also agreed to contribute scientific research on easing the area’s water crisis and start a reforestation effort near its factory grounds.
The next day, during Tesla’s Investor Day event, Musk said the Mexico plant will play a major role in producing the company’s next-generation vehicle. According to Chinese tech site 36Kr, this car is the company’s most affordable model yet, and the Mexico factory will be the main production facility. Beyond that, Tesla hasn’t expanded on its plans.
The future site of the Monterrey factory is about a 45-minute drive from the city center. On the way, you pass through Santa Catarina, a municipality dominated by industrial parks, factories, and smokestacks. After that, the area’s characteristic landscape of cacti, bushes, and mountains comes into view. Tesla’s nearly 1,700-hectare plot, next to a golf course and an old race track, is currently little more than rocks and shrubs.
It is situated right in one of Mexico’s car-making regions. The country is one of the world’s biggest manufacturers of cars and car parts, and Nuevo León, convenient for exporting to the U.S., is one of the industry’s most important states. Kia Motors has a factory in Pesquería, northeast of Monterrey. The highway that goes by the Tesla site leads to Ramos Arizpe, the city just across the state border where General Motors has a manufacturing hub. The area is also home to many car-parts companies, which supply the automakers.
Following the factory’s official announcement, Nuevo León’s economic secretary said the state already had six Tesla suppliers, some of which sell to Tesla’s factory in Austin, a six-hour drive away. The company’s relationship with the state is so strong, trucks with Tesla parts have their own express lane at Nuevo León’s border crossing into Texas.
Nuevo León governor Samuel García is a big Tesla fan. He and his wife, influencer Mariana Rodríguez, frequently celebrate the company with their millions of Instagram followers. Their posts include a photo of the couple posing in matching Tesla T-shirts, and a video joking about naming their daughter “MariElon” and a potential future son “SamuElon.” The governor has visited Tesla’s Berlin and California factories, gifted Rodríguez a Model X SUV for Valentine’s Day, and has said Nuevo León is in a state of “Teslamania.” Today, state capital Monterrey is dotted with billboards bidding Tesla a warm welcome, paid for by local governments and companies.
Tesla’s water promises have not alleviated concerns about its potential impact. The Monterrey metropolitan area gets its fresh water from the three reservoirs fed by the Río San Juan and its tributaries, and from groundwater pumped up from underground aquifers. Retained sewage water, meanwhile, is transported to treatment plants operated by Nuevo León’s public water utility, Servicios de Agua y Drenaje de Monterrey (SADM), to make it suitable for industrial and agricultural use. This is where Tesla will get its water.
Researchers say that car-assembly plants like Tesla’s don’t carry out many water-intensive processes. “Like any auto-manufacturing plant, water is mostly used in the paint shop process,” Alejandro Rojo, a professor at Tecnológico de Monterrey who specializes in auto-manufacturing processes, told Rest of World. The local car factories he has visited all take measures to limit water use.
Mexico’s then foreign minister, Marcelo Ebrard, tweeted during a visit to the Santa Catarina site in late March that Tesla’s Mexico factory would be the least water-consuming auto-manufacturing plant in the world. Musk later corrected this via Twitter, saying it would be the least water-consuming “per vehicle.”
Tesla’s 2022 environmental impact report stated that the company’s vehicle manufacturing facilities had achieved a year-on-year water consumption reduction of 15% per car. Tesla estimates its plant in Berlin will use 1,800 liters of water per vehicle while Austin’s will use 2,780 liters per vehicle once at full production capacity, which the report claims will be less than other large automakers. (These figures do not take battery production into account.) Rojo told Rest of World EVs are inherently less water-intensive to assemble compared to internal combustion engine cars because they use different components.
In absolute numbers, however, Tesla’s estimated water usage still adds up to a significant quantity. A Mexican government official has claimed the Monterrey factory will assemble up to a million cars a year, more than any Tesla factory currently produces.
“I think [Tesla] would be the biggest customer of treated water we would have,” Juan Ignacio Barragán, head of SADM, told Rest of World, stressing that plans are not yet definitive.
Tesla at first asked for 120 liters of water per second, and later adjusted its preliminary request to 85 liters per second, Barragán said. The exact amount Tesla would need is still unknown. In comparison, most of SADM’s customers buy about 5 liters per second, he said. He further estimated that two other big auto industry customers, Kia and steel supplier Ternium, buy 50 and 70 liters per second, respectively.
Tesla’s plan requires the construction of an 18-kilometer pipeline to connect a water treatment plant in García — another outlying municipality near Monterrey — to the Tesla facility in Santa Catarina. “We are waiting for Tesla to turn in information [on their water use] for us to make a proposal,” Barragán said. He noted that in all likelihood, the treatment plant will have to expand its capacity.
Currently, treated wastewater isn’t directly used for residential consumption, meaning that Tesla would not be in direct competition with residents for water. But that is set to change in the future, as Monterrey looks to increase its capacity to supply drinking water. In response to 2022’s water crisis, the state and federal governments announced around a billion dollars in spending for a new aqueduct, the completion of a new dam, and more deep wells to bring more water into the city. These efforts might still not be enough to meet future needs, Barragán said, and therefore SADM is exploring ways to improve the treatment of wastewater so that it is safe for residential use. The plan is to start by late 2025 at the earliest.
Tesla’s use of treated wastewater — also called residual water — will limit how this water can be reused in the future, said Aguilar, the researcher. “We are going to see competition for residual water from the agriculture sector, the industry, and domestic use.”
Blanca Lázaro lives in García and works at Tacos Mary, a small restaurant located a few blocks from the water treatment plant that is set to supply Tesla. Last summer, during the drought crisis, Lázaro’s boss sourced and sent water to the restaurant in plastic barrels throughout the day, which she stored in buckets. Cooking, washing dishes, and cleaning tables all became a challenge.
Lázaro is aware officials have promised that Tesla will only use treated water. But she told Rest of World she is still concerned about the company’s local impact. Like other “Regiomontanos,” as people from Monterrey are called, she remembers all too well how big companies didn’t suffer from shortages during last year’s water crisis.
“They said it won’t affect us,” Lázaro said, as she flipped a tortilla on the comal. “But we will have to wait and see when the heat gets worse.”
Tesla’s impacts will go beyond those of its own factory. Its plans are widely expected to attract many businesses and people to the area — a prospect some delight in and others are wary of.
In the working-class neighborhoods near Tesla’s factory site, local residents are split between the promise of new jobs and concerns that they would be negatively impacted. Interviewees told Rest of World the planned changes have reignited fears that Monterrey’s economic development would leave the city’s most vulnerable behind — that the sudden increase in activity would further strain already inadequate infrastructure, and that the anticipated influx of new workers would push low-income communities farther away from the city.
Public services in Nuevo León have not kept up with the rapid increase in population, which grew more than 24% between 2010 and 2020, and economic activity, which rose by 6.1% last year — both outpacing national averages.
Ascención Ibarra, a former metal factory worker, lives in Santa Catarina and sells secondhand clothing from two folding tables set up on the sidewalk outside his house. He is worried the new factory would further degrade the quality of life in his town — including by exacerbating water cuts. He told Rest of World 2022’s water cuts continued up until April 2023 for him, long after the government claimed the issues had been resolved. The Santa Catarina municipal government did not respond to an interview request.
Eugenio Montiel, director of Nuevo León’s Housing Institute, estimated that the expected influx of workers for Tesla and other companies would require the construction of at least 13,000 homes. He told Rest of World that though the government is trying to ensure these are, in part, affordable units close to the factory, supply and demand might make any new housing unaffordable. This could end up pricing many low-income people out of Santa Catarina, he said.
Already, homes have shot up in value. Jaime Rodríguez, director at Investo Real Estate, claimed he noticed a price increase of between 20% and 30%, especially for pre-sale apartments, a week after Musk spoke with the president in February. “Are they going to keep increasing? Yes,” Rodríguez told Rest of World. “Every two months we have to update prices due to inflation, but prices in Santa Catarina have jumped only because Tesla is coming.”
Tesla’s suppliers are anticipating higher production at existing facilities in the area, or building new ones. AGP Group, a windscreen and panoramic roof supplier, announced it is investing $800 million in Santa Catarina. Noah Itech, another Tesla supplier, is constructing a new plant in the town, an investment worth $100 million. During a trip to Taiwan and South Korea in May, García, the governor, announced that Quanta Computer, an electronics manufacturer, was also expanding operations in Nuevo León with an investment of $1 billion, and teased investments from other Tesla providers like Foxconn and Delta Electronics. According to a 36Kr report, Tesla is also pressuring its Chinese suppliers to set up operations in Mexico. García calls Nuevo León the world’s next electromobility hub. “Silicon Valley is going to fall short,” he posted on Instagram.
This expansion of industry around the Tesla plant means further demand on local resources. Besides surface water, some municipalities in the greater Monterrey area use water from underground aquifers to supply residents. While Tesla itself has promised to only use treated water, some of its local suppliers tap these same aquifers.
Conagua, the national water commission, grants concessions to companies to extract a certain amount of underground water for a period of up to 30 years. Ternium, the steel maker, is reportedly a Tesla supplier. It currently holds the most water concessions in Nuevo León, with 27 concessions totaling more than 12 billion liters of water per year. One-time Tesla supplier Nemak, which makes structural components for EVs, also has a large water concession, as does Metalsa, a manufacturer of metallic structures for the auto industry that is in negotiations with Tesla.
The current use of aquifers appears to be unsustainable. According to Conagua, 13 of the 23 aquifers that supply Nuevo León are overexploited, meaning that water is extracted at a faster pace than it is replenished. “It is already concessioned to industry and for urban public use,” said Aguilar. “Water is being extracted, and the problem is that the level of the wells is also going down.” Conagua did not respond to an interview request.
Antonio Hernández, a local environmentalist and biologist, told Rest of World he fears Tesla suppliers may exceed their concessions to meet the increased demand once the Monterrey factory is in operation. “There is no administrative capacity in place to inspect and monitor to ensure that only the granted volume is being exploited,” he said. “[Concessionaires] can take out more and no one will say anything.”
And while natural systems are being tapped more intensely than ever, the future holds a slowing rate of replenishment. “The climate is changing and the scientific consensus is that all semi-arid regions of the world, including Monterrey, will experience less precipitation,” a hydrologist at a public research center, who spoke on condition of anonymity because he was not authorized to speak to the media, told Rest of World.
For now, average rainfall levels have remained steady. According to the hydrologist, the decrease in water availability is due to increased demand. “The only probable cause is that more water is being withdrawn,” he said. “State authorities haven’t figured out how to put limits on water extraction.”
Rosario Álvarez, executive director of Pronatura Noreste, an environmentalist civil society organization in Nuevo León, told Rest of World Monterrey’s economic growth should be paired with more concern for the city’s water resources. She said the federal government is not doing enough to hold large companies accountable. “Mexico’s environmental laws and norms are lax, old, and haven’t been updated,” she said. “That leaves a big hole.”
The Tesla factory is just the latest flashpoint in a much broader conversation around industrial water usage in the area. “Tesla’s decision to settle in Nuevo León is favorable all the way around,” said José Luis Luege, a former director of Conagua who now runs Ciudad Posible, a nonprofit that advocates for sustainability. The state, he said, has “a substantial lack of water,” but the situation isn’t as dire as some other regions in the country.
The real problem, Luege told Rest of World, is not Tesla’s water use but the Mexican government’s long-term water management strategy, as well as inefficient uses of water. Agriculture uses and wastes too much water, he said, while local water utilities have had their budgets significantly cut in the past decade and are highly inefficient. Nationally, about half of all potable water is lost because of leaks, Luege said. (SADM’s Barragán had claimed in 2022 that only 11% of potable water leaks away in Nuevo León.) With better governance, “it is possible to have more industry, more population growth, and meet demand,” said Luege.
“The benefits of the Tesla factory are 100 times greater than the problems it could cause,” said Rojo, the Tecnológico de Monterrey professor. “The economic impact on the region, all the investments that it will attract in infrastructure, real estate, highways, and quality of life.” Governor García, in an Instagram video, said Nuevo León will invest in infrastructure to meet the moment. “Highways, airports, parks, a metro, and train [connections] to receive Tesla, God willing,” he said.
In early June, a mural celebrating Tesla appeared on the side of a one-story building in Santa Catarina. Both García and the Santa Catarina mayor were quick to share it on Instagram. The mural features a giant portrait of Musk, amid the words “Future,” “Tesla,” and “Welcome.”
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