MEXICO has become one of the most attractive poles for the development of electromobility, such as the manufacture of electric and hybrid cars. Today, companies have their eyes on Mexico to put the accelerator in this promising business.

José Francisco Garza, president and general director of GM Mexico, Diego Camargo, CEO of BMW Group Mexico, Horacio Chávez, Managing Director of Kia Mexico and Salvador Portillo, president of the National Chamber of Electrical Manufactures. June 2023 Photo: © Karina Hernández, Oswaldo Ramírez and Fernando Luna Arce.

The coordination of public policies, the growing need for alternatives that mitigate the consequences of climate change and the growth plans of the global automotive sector were the necessary ingredients to form, in record time, the Working Group for the Electrification of Transportation, a orderly transition program towards electromobility as a meeting point between Mexico and the United States, for the manufacture and use of electric vehicles.

“We still lack many things, but we are already protagonists. And this derives from the fact that Mexico is a country with a great leadership in the manufacture and export of light vehicles for the whole world”, affirms José Zozaya, president of the Mexican Association of the Automotive Industry (AMIA), an organization that plays a role leading role in this strategy.

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But Mexico's position in electrification is not accidental, as it is the result of a combination of a strategic geographic location, skilled labor, an extensive supply network, and free trade agreements with different regions of the world.

“We believe in an electric, sustainable and digital future for our industry, and we firmly believe that Mexico can be a protagonist”, considers Diego Camargo, CEO of BMW Group Mexico, a German company that just in February announced the investment of 800 million euros (mde) at its plant in San Luis Potosí, for the manufacture of electric cars and batteries.

Meanwhile, at Kia, which is preparing to announce new investments in its Nuevo León plant to manufacture its first electric models, it is said that the positioning and attractiveness of Mexico did not emerge recently, but dates back a long time, even before the rise of nearshoring. "Our country is one of the main destinations for the production of automobiles thanks to many factors, and just to mention a few, let's think about the high quality of the workforce," says Horacio Chávez, Managing Director of Kia Mexico.

EQUAL FOOTING

Chinese automakers, coming from a mature electric car market, have opted for the Mexican territory, both for the supply of electric units and plug-in hybrids. And although the conditions of the electric market in Mexico are different from those of China (because in that country not only are subsidies granted for the purchase of electric, but car manufacturers are subjected to the issuance of renegotiable credits), the Chinese electrical manufacturers are also studying the installation of plants to produce cars in the Mexican territory.

It has been in the last five years that Chinese automakers have arrived in Mexico, and they have done so with the conviction that their products would achieve good placement, although some have been pleasantly surprised by their great acceptance among Mexicans. For this reason, they have even nurtured their plans so that their presence extends further throughout the national territory.

Such is the case of the Chinese BYD, which announced its arrival in the Mexican market in November 2022, although it presented its first electric models in March 2023, and, after obtaining a favorable response from Mexican consumers, decided to expand its field of sales ( that originally would only be in Mexico City and Guadalajara) to the entire country.

MG Motors, in its case, recorded historic growth in sales in Mexico, becoming a brand that in just a couple of years reached eighth place among those with the most units placed in the country. In addition, between the growth in sales and points of sale, a good part of the Chinese automakers in Mexico are also considering the installation of plants in the country to produce cars.

In March, José Ángel González, vice president of Chirey, said that the company was entering a stage of analysis for the installation of a plant in Mexico, so that these facilities can supply the Central and North American market. In his case, Daniel Nava, Vice President of Operations at MG Mexico, comments that the automaker plans to set up a plant in the country to achieve sales targets and get closer to the important US market.

BYD is also studying the plan to install a plant in Mexico, although the most recent actions to expand its infrastructure here have been aimed at opening points of sale through associations with commercial chains, such as the Port of Liverpool. The assembly company already has three stores open in national territory, as well as a workshop. And it expects to close the year with the total opening of 50 showrooms.

“From the commercial opening that the North American Free Trade Agreement brought us, many more competitors began to arrive, not only to fight for the Mexican market, but also to fully establish themselves, generating a manufacturing footprint in the country and, Today, in the domestic market we compete with almost 60 brands.

 If we analyze the latest ones that have arrived in our country, we see that they are of Chinese origin and are having relevant market shares and, obviously, this causes us to continue improving the facilities of our distributors and offering the best product portfolio in the market," says Garza, from GM Mexico.

WHAT ABOUT THE DOMESTIC MARKET?

Regarding the domestic issue, the demand is still not growing at the same speed, because the necessary incentives do not exist to make these products more accessible, or the appropriate infrastructure for the massification of electrical technology. "But we believe that the consumer is increasingly interested in technology," says Horacio Chávez, Managing Director of Kia Mexico.

José Francisco Garza, president, and general director of GM Mexico, agrees with this vision, but adds that, in his case, they created an education and teaching process for the client. “What we have found are two types of customers: one who is super prepared and who comes to the dealer to buy his electric vehicle and knows more than everyone and knows the financial impact, when he must charge it, how far it will go tour, how to regenerate the battery without using a charger, and so on. But there is another who says: 'Hey, [I'm here because] I hear a lot about the electrification of transportation.' So, he buys a vehicle, and then? ”, Says the executive.

THE CHALLENGE OF CONTINUITY

One of the main actors in the electromobility strategy has been Marcelo Ebrard, former head of the Ministry of Foreign Affairs (SRE), who chose to run for Morena's candidacy for the country's presidency.

The continuity of the strategic plan would be guaranteed as long as the cohesion of all those involved was maintained, although, for Salvador Portillo Arellano, president of the National Chamber of Electrical Manufactures (Caname), the challenge is bigger. “We need to define a clear State policy that encourages electromobility in Mexico. The Ministry of Foreign Affairs, the Ministry of Economy and, a little behind, Semarnat, are making great efforts to unite us, but there is still a long way to go; we must establish a governing policy that brings us together in all sectors”,

Another of the great challenges, especially to encourage sales in the local market, is the charging infrastructure for vehicles, which today is in its infancy. In 2017, only 1,528 public recharging centers were reported and, at the end of last year, the figure reached 2,100 stations (many already victims of vandalism), against 13,291 gas stations operating in the country. Initially, the infrastructure was financed by some of the automakers, but the projected demand is very high, with an estimate of 13,700 public stations by the end of 2030.

And, even though some federal agencies are looking for alternatives to accelerate the deployment of the infrastructure, there is still no defined project, which generates business opportunities such as the resale of energy by private companies and the installation of charging points at gas stations. However, before resolving this dilemma, prior approval of charger technology is necessary, as is happening in the United States, where Tesla, which operates the largest network of charging stations (with 45,000 Supercharges worldwide) , will allow the connection of Ford and General Motors units.

"We are not encouraging the purchase of electric cars, but, without a doubt, we have to improve the infrastructure if we really want to go towards electromobility," emphasizes Portillo Arellano. Diego Camargo, CEO of BMW Group Mexico adds that the essential elements for the development of electromobility projects in Mexico are, for example, access to the supply of renewable energy for sustainable production, development in collaboration with academia and the government in programs of training in new technologies, and facilitating procedures and services for companies, among others.

In addition, in the document "Diagnosis and recommendations for the transition of the automotive industry in Mexico", coordinated by the SRE, additional challenges are identified based on international experiences, which it groups into three categories: 1) Innovation and development in the automotive sector electric; 2) Innovation in circular economies, recycling and disposal of batteries, and 3) Innovation and specialized human resources.