American electric pioneer Tesla Motors is planning to set up its next assembly plant in the Monterrey City of Mexico, Mexican president Andrès Manuel Lopez Obrador confirmed during a recent news conference.

Located at the foothills of the Sierra Madre Oriental, Monterrey is the capital and biggest city of Mexico’s northeastern state of Nuevo León. After Mexico City, Monterrey is the second biggest city in Mexico – the third largest country in Latin America, after Brazil and Argentina.

Confirming Tesla’s plans to build a new factory in the country, President Obrador revealed that the two sides have already signed a document of understanding, in which the EV giant has agreed to make a significant investment in the latin American country.

Speaking on the topic, Obrador said, “There is already an understanding, yes they are going to dedicate the investment to Mexico and the plant is going to be established in Monterrey with a series of commitments to face the problem of water scarcity."

Confirmation of the location of Tesla’s planned assembly facility by the Mexican president came just a day before the electric car maker’s important Investor Day presentation.

Last month some media reporters had reported that Mexico was the front runner for the location of Tesla’s next assembly plant, but exactly where in the country it would be positioned was a mystery.

The choice of Monterrey as the location for Tesla’s new facility makes sense as it is just around 140 miles south of the U.S. border at Texas. It means transporting new Tesla EVs into the U.S. market will be a relatively easy work. It will also be easy for executives as it is going to be a relatively short flight from Tesla's corporate headquarters in Austin, Texas.

The greater metro area of Monterrey has a population of around 4.5 million. Thus, there were concerns that welcoming the American EV giant’s facility might inflate the region's problem of water shortage. However, Tesla Chief Executive Officer (CEO) Elon Musk has assured the Mexican president that it won’t be an issue.

For the last few years, Mexico has unprecedentedly been attracting foreign investments in EV and its related segments. Ford Motor Co., for instance, is already producing the Mustang Mach-E in Mexico, while General Motors (GM) is going to set up a production plant for producing Ultium-powered EVs. Luxury car brand BMW is also planning to build its next-generation EVs in the third largest Latin American country.