Is Mexico is set to be the big winner of the Electric Vehicle revolution?


The electric vehicle market is exploding worldwide. By 2030, the International Energy Agency predicts, EVs will represent 60% of all vehicle sales globally. And in the U.S., despite total vehicle sales dropping 8% year over year in 2022, sales of EVs jumped 65%, according to data from Kelley Blue Book. Although countries like China have grabbed headlines in the EV race, the biggest beneficiary of all that expansion might be Mexico.

“Mexico has unique advantages that could help solidify its position in the automaking industry amid the EV transition,” UBS’s Alejo Czerwonko, chief investment officer for emerging markets Americas, and Gabriela Soni, CIO for Mexico, explained in a Thursday note.

Mexico has the world’s 10th-largest store of lithium, which is a key component used in EV batteries that is commonly referred to as the industry’s “white gold.” And the country’s current auto manufacturing strength, coupled with an increase in nearshoring—where manufacturers rework supply chains closer to home—after pandemic-era supply-chain mishaps, is likely to make it an EV powerhouse in the future, Czerwonko, and Soni said.

But the pair were also careful to warn that Mexico’s EV success is not guaranteed and that it “faces a long road ahead” owing to one key factor: a lack of energy infrastructure necessary to go all in on EV manufacturing.

Serious EV advantages

Mexico is already the fourth-largest exporter and seventh-largest producer of cars globally and hosts a number of big-name automakers, including ToyotaKiaVolkswagen, and Nissan. Ford even produces its Mustang Mach-E EV at the Cuautitlán Stamping and Assembly Plant in Cuautitlán Izcalli, about 20 miles outside Mexico City.

Multiple automakers have also recently announced moves into Mexico to produce EVs. General Motors said last year it will build the 2024 Blazer EV and Equinox EV at its factory in Ramos Arizpe, a city in the northern state of Coahuila. BMW said just last month that it will invest $866 million into EV production in the country. And Tesla announced plans last week for a $5 billion Giga factory in Monterrey, Nuevo León, about 120 miles from the U.S. border.

Local officials have said that the 4,200-acre site is nearly double the size of the EV giant’s Texas facility.

“This is a game changer for a transition from traditional industry to an industry of the future, a green industry,” Nuevo León Gov. Samuel Garcia said Friday, adding that it could lead to $10 billion in total investment into his state in the coming years, Bloomberg reported.

Czerwonko and Soni called Tesla’s move “a vote of confidence in Mexico’s auto manufacturing industry and its hopes of gaining market share in the global electric vehicle (EV) space,” and noted it’s just one of many data points that demonstrate Mexico is already benefiting from nearshoring. Through the first nine months of 2022, direct foreign investment into Mexico increased by 29.5%, the most since 1999, according to data from Mexico’s Confederation of the National Chambers of Commerce (CONCANACO).

Source.- El Financiero

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