Mexico and the energy challenge ahead

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Despite all the advantages that Mexico offers to the Electric Vehicle Industry, there is a lack of stable energy infrastructure, and that is a problem when it comes to EV production. EV production facilities are incredibly energy intensive as are the vehicles they produce.

UBS’s Czerwonko and Soni said that energy availability is a major source of concern for them given Mexico’s reliance on fossil fuels and frequent power outages. Mexico is aware of the problem, and Secretary of Foreign Affairs Marcelo Ebrard said last month that he will support multiple manufacturing hubs for EVs in the country by building five huge solar plants to produce five gigawatts of energy capacity. He told Reuters that he was hoping to attract all the foreign investors he could with the project, noting that BMW, Audi, GM, Fiat Chrysler, and, of course, Tesla had all expressed interest in producing EVs in the country.

“Big questions remain about the financing of such an ambitious plan, as well as the efficiency and operational management capability of the state-owned power company to deploy an investment of such scale,” UBS’s Czerwonko and Soni cautioned, arguing “significant additional investment is required to develop Mexico’s renewable energy sources.”

The UBS team noted that Mexico hopes to get funding for its energy project through the North American Development Bank (NADB), which was created by the governments of Mexico and the U.S. to help finance infrastructure projects. But that’s not a sure thing.

“It seems unlikely that the NADB would provide the number of resources that the Mexican government needs. Hence, the plan will likely require a mix of private, public, and development bank funding,” they warned.

Planning for the future

Still, the Mexican state electric utility CFE has already begun work on its first solar plant, which will be the largest in all of Latin America, in the northern state of Sonora. The government also plans to expand its total renewable energy capacity to 30 gigawatts by 2030.

Mexican President Andrés Manuel López Obrador nationalized the production of lithium in 2022 as well and set up a state-owned company called LitioMx to manage its exploration, mining, and refinement last month hoping to attract foreign investors. The company is already in talks with Canadian lithium miner Advanced Lithium to mine the metal for EV battery production, Reuters reported Thursday.

Czerwonko and Soni said that, overall, they believe that Mexico can “capture the emerging EV opportunity,” as long as public-private partnerships function as intended.

Source.- El Financiero

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