Tesla appears to be pushing ahead with its stated plan to build a new EV manufacturing plant in Mexico.

According to Reuters, Tesla has received land-use permits from Mexico’s federal environment ministry to build a planned gigafactory in the northern border state of Nuevo Leon. Reuters cited the state government as source.

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According to the report, the state government said the land designated for the plant spans around 261 hectares (645 acres).

Tesla said at its investor day conference in March that it planned to build a new EV factory in Mexico.

The company said it would build the new facility near Monterrey, some 200km (120 miles) from the US border with an initial investment of US$1bn which could rise to US$5bn with component manufacturing facilities including batteries, according to Mexican government minister Martha Delgado.

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While analysts have suggested the plant would help the company reduce dependence on Chinese operations, reflecting rising US-China tensions, CEO and largest shareholder Elon Musk said Tesla “will continue to expand production at all of our existing factories. So this is not moving output to anywhere, from anywhere. This is supplemental production.”

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The new plant would help meet growing demand for EVs in the US as vehicles produced there would qualify for tax breaks and other incentives worth up to US$7,500 pr vehicle under the US Inflation Reduction Act (IRA).

Tesla has an ambitious looking target to sell up to 20m EVs per year by 2030. Analysts say the target is quite a challenge on such a short timescale, given its lack of new models and the fact competition in EVs will only strengthen from both legacy OEMs and start-ups.