A state governor in Mexico said Tesla and suppliers would invest US$15bn over the next two years in a factory near Monterrey, 200km (120 miles) from the US border.

Last March, Mexican officials said Tesla would build the new factory with an initial investment of $1bn which could rise to $5bn with component manufacturing facilities including batteries.

Now, it appears the overall investment by automaker and suppliers could triple.

According to Reuters, Tesla planned to begin production in Mexico in 2025 but the company was yet to announce a construction start date.

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

Other automakers such as BMW, General Motors and Ford have also announced EV investments in Mexico.

Mexico provides advantages such as “relatively cheap labour and free trade agreements with 50 countries”, Bloomberg noted.