Tesla is planning to build a new factory in Mexico, joining other carmakers bulking up their presence south of the US border.
Mexico President Andres Manuel Lopez Obrador said the plant for the electric car firm would be in Monterrey, which is about a three-hour drive from Texas.
Tesla is expected to share more in presentation to investors on Wednesday.
Mexico had previously raised concerns about how water demands from the factory might affect the region.
But Mr Lopez Obrador said he had won commitments from Tesla boss Elon Musk that had helped ease those worries.
Mexico is trying to position itself as a winner as tensions between the US and China disrupt traditional supply chains.
"This will represent a considerable investment and many, many jobs," Mr Lopez Obrador said at a news conference on Tuesday.
US President Joe Biden has emphasised made-in-America rules for cars to qualify for new subsidies included in a massive spending plan approved to tackle climate change last year.
But the rules provide exceptions for Canada and Mexico, which has seen its role in car manufacturing grow as American firms look outside the country to reduce costs.
This would be Tesla's third factory outside of the US, after the firm opened plants in China and Germany in recent years.
Reuters reported the newest Tesla factory represented an initial $1bn investment, which could grow to be $10bn over time.
Martha Delgado, a Mexican deputy foreign minister, told Milenio Television the investment was worth "in excess of $5 billion" and that the factory would produce about one million vehicles per year.
Another unnamed Mexican official told Reuters news agency the plant would be a Tesla "gigafactory" that will produce vehicles including their truck and sports car.
The company did not respond to a request for comment on its latest expansion.
Tesla, like other carmakers, is anticipating that electric car purchases will grow rapidly in the years ahead as drivers turn to greener modes of transport.
The confirmation of Tesla's plans comes just a few weeks after BMW said it would be investing in a factory in Mexico. Ford also manufactures its electric SUV in the country.
General Motors announced plans to build a plant for electric cars in Mexico last year, prompting the United Auto Workers trades union to describe the decision as a "slap in the face".
In Mexico, the investments have been closely watched as a test of the investment climate under Mr Lopez Obrador, a left-wing populist, who was elected in 2018.
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