Elon Musk's electric carmaker Tesla will open a plant in northern Mexico making a significant investment in the Latin American nation, Mexican President Andres Manuel Lopez Obrador announced Tuesday.

"The plant is going to be established in Monterrey," Lopez Obrador told reporters after speaking with Musk.

The factory was expected to be "very big" and would bring "a considerable investment and many jobs," he added.

He said the US company had promised to address the problem of water scarcity in Monterrey, an industrial powerhouse home to transnational firms a few hours' drive from the US border.

"He was very receptive, understanding our concerns," with measures expected to include the use of recycled water, Lopez Obrador said, adding that the company would announce more details soon.

Mexico declared a drought emergency in July last year and authorities in parts of the country, including Monterrey, were forced to ration water use due to depleted reservoirs.