Farewell gasoline, hello Mexico? More and more companies are considering it, as the Aztec country emerges as a key player in sustainable mobility.
Nearshoring is behind this boom: companies producing electric vehicles (EVs) and components such as batteries, electric motors, and charging systems are setting up operations there to be closer to the North American market, especially the United States.
The proximity to the US market reduces transportation times and costs, allowing for a quick response to demand.
Additionally, the United States-Mexico-Canada Agreement (USMCA) offers tariff advantages and favorable regulations, while the country’s skilled and competitive labor force is a key attraction.
In-depth benefits
One of the most notable points of the USMCA is the reduction of tariffs for electric vehicles and their components.
This not only reduces import and export costs but also allows Mexican companies to offer more competitive prices in the global market.
Furthermore, it encourages the production of electric vehicles in North America, creating a favorable environment for manufacturers in the country.
The treaty also simplifies regulatory compliance: manufacturers in Mexico can access the United States without issues, becoming an advantage for investors.
The deployment of the Asian Giant in Mexico
China sees this gap, and in its bid to lead electric vehicle sales, considers Mexico a strategic ally.
The reality is that the presence of the Asian country in the sustainable European market is noticeable. In fact, in February this year, one in five electric cars registered in Europe was manufactured in the East.
As a result, car manufacturers are planning to set up plants across the “old continent“.
The scenario is mirrored in Latin America, where the Chinese see an opportunity to make the leap and establish their own production.
In this context, the Mexican market can be very attractive and offer a unique opportunity.
Currently, around 20 Chinese manufacturers sell cars in Mexico, although none have a plant in the country.
However, that is about to change, as brands like BYD, Chery Group, and Great Wall Motors are on Mexican soil, defining locations to set up their factories.
Meanwhile, JAC will expand its production plant in Hidalgo to operate seven assembly lines, thus anticipating demand with the presence of electric cars and trucks.
It’s worth noting that this move comes with complications: the United States has increased taxes on Chinese vehicles to 100%, and under pressure from the US, Mexico has stopped offering incentives such as low-cost land or tax cuts for investment in electric vehicle production to the Asian country.
Tesla and its Gigafactory
But the deployment isn’t just from China; Elon Musk’s firm will invest five billion dollars in an electric vehicle plant in Nuevo León.
This production will reach one million units per year.
A significant milestone for Mexico: the country produces 2.4 million units per year, being, according to authorities, the fourth largest producer in the world.
The new volume would add more than 40 per cent in zero-emission technology.
More supply, more demand?
One point here is that if Mexico aspires to become the Latin American leader in electromobility in the coming years, it must achieve greater penetration of sustainable vehicles.
The numbers aren’t bad. It was observed that in February 2024, 7,248 cars with technologies aimed at decarbonizing the vehicle fleet were sold.
This figure constitutes 6.4 per cent of the total sales of light vehicles in Mexico.
Now, what place do electrified vehicles occupy?
Of this percentage, the share of zero-emission vehicles is 1.24 per cent with 1,405 units. Hybrids take the largest share of sales with 4.75 per cent, that is, 5,379 cars sold.
Meanwhile, plug-in hybrids are the minority, representing 0.41% of total sales, about 464 vehicles.
In this sense, Guillermo Rosales Zárate, the executive president of the Mexican Association of Automotive Distributors (AMDA), sets the record straight.
“The participation of 100% electric vehicles in the Mexican market remains marginal, barely around 1%,” says the executive.
Here, he makes it clear. For Rosales Zárate, there is no public policy in Mexico that manages to stimulate the consumption of electrified vehicles.
Thus, he hints at a request from the sector: that from October 1, with a new federal administration, “closer” policies be established to promote not only electric cars but also the implementation of charging infrastructure and the promotion of public transport renewal.
Sheinbaum: a favorable outlook for the sector
After winning the elections by a wide margin, Claudia Sheinbaum became the first female president in Mexico’s history.
She is characterized as a staunch “promoter” of electromobility and will continue the change initiated by Andrés Manuel López Obrador in 2018.
“We will respect business freedom and promote and facilitate with honesty private national and foreign investment that fosters social welfare and regional development, always ensuring respect for the environment,” said the politician after the results were known, declaring her the winner.
She also affirmed that Morena’s continuity in the National Government will be with a foreign policy “based on our constitutional principles of non-intervention, international cooperation for development, self-determination of peoples, and the construction of peace.”
She referenced the relationship with the United States as “friendship, mutual respect, and equality.”
There is no doubt that nearshoring is on Sheinbaum’s mind, making it essential to define a new diplomatic strategy with Washington.
Why? For Mexico, it means the possibility of accessing foreign direct investment by escaping restrictive legislation that responds to geopolitical wars.
Thus, the nationality of the investment wouldn’t matter, if development models are proposed in favor of local populations.
