The minister said Mexico could not match US incentives for the proposed Tesla battery factory

MEXICO CITY (Reuters) – Mexico will not be able to match incentives offered under a US law to tame inflation if Tesla builds a battery factory in the country, Mexico’s finance minister said on Friday, days after Tesla announced it was building a “gigafactory” there.

Tesla hasn’t confirmed whether it will also build a battery factory in Mexico, but local officials say Tesla has visited the states of Hidalgo, Queretaro and Puebla to scout potential sites.

“We didn’t let (Tesla) waste its time thinking we would be able to match the US inflation act,” Finance Minister Rogelio Ramirez told reporters at an event with Citigroup’s Mexico unit.

A Tesla representative in Latin America did not immediately respond to a request for comment.

The Reducing Inflation Act, signed into law in August, offers a $7,500 tax credit to electric vehicle buyers if the vehicle’s battery meets the threshold to obtain parts from the United States or other free trade partners, such as Mexico.

CEO Elon Musk said on Wednesday that Tesla will build a massive factory in the northern state of Nuevo Leon, which local officials said could bring in up to $10 billion in investment and create 10,000 jobs.

And while Mexico welcomed the investment, Tesla said it “doesn’t need any kind of fiscal stimulus” other than the benefits allowed under Mexico’s free trade agreements to build the plant, according to Ramirez.

A decision on a battery plant in Mexico has not yet been announced.

“The battery plant was not in (Tesla’s) original plan, it was the Mexican government’s proposal,” Ramirez said.

Without legislation, Ramirez said, Mexico will not be able to match American incentives.

(Reporting by Kaylee Madre and Nou Torres; Editing by Sarah Moreland)