Tesla is going to open a new manufacturing unit in Mexico.

As rival automakers expand their operations south of the US border, Tesla plans to do the same by constructing a new unit there. The factory for the electric car company will be in Monterrey, which is roughly a three-hour drive from Texas, according to Mexican President Andres Manuel Lopez Obrador.

At its presentation to stakeholders on Wednesday, Tesla is predicted to provide further information.

Concerns over the factory’s potential impact on the area’s water supply have already been voiced by Mexico. 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. Under a large expenditure plan enacted last year to combat climate change, US President Joe Biden stressed made-in-America criteria for cars to apply 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 production unit 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.

Like other automakers, Tesla believes that as consumers switch to more environmentally friendly forms of transportation, the number of electric car purchases will increase significantly in the coming years. After BMW’s announcement that it will be investing in a plant in Mexico, Tesla has also confirmed its ambitions. Also, Ford makes its electric vehicles here.

Last year, when General Motors revealed intentions to establish an electric vehicle manufacturing facility in Mexico, the United Auto Workers trade union called the move a “slap in the face.”

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