Mexico is home to a massive automotive industry, with several manufacturing hubs dispersed across the country. The automotive sector accounts for around 3.5% of Mexico's GDP and 20% of its manufacturing GDP, employing more than 1 million people. But as carbon emissions become more of a concern and major cities battle rising air pollution, many companies are pushing for a switch to electric.

Welcoming Electric Vehicles to the Market

In 2021, there were approximately 51 million motor vehicles across Mexico. Mexico City alone is home to 5 million cars, with a further 5.1 million registered in neighboring Mexico State. But as more people move to larger cities, the challenge of air pollution is becoming more prominent.

The government has repeatedly tried to tackle the issue through schemes such as Hoy No Circula (No-Drive Days), in which drivers are prohibited from using their cars during peak hours on specific days based on the numbers on their license plates. There are also strict emissions tests in place to prevent cars with higher emissions from being on the road. But as electric vehicle (EV) uptake increases worldwide, we believe Mexico could use its long-standing automotive manufacturing experience to become an EV hub.

In addition, we envision increased EV uptake in major cities in response to emissions controls and air pollution concerns. The Mexico City Government has already announced an initiative to replace its public transportation with EVs, supported by increased production of clean electricity.

We Expect Strong Growth for EVs in Mexico

EV uptake in Mexico increased by around 68%, and EV and hybrid sales are expected to reach 200,000 by 2030, around two-thirds of the Latin American total of 300,000. We expect the market to grow by around 25% to 30% annually over the next five years. 

We expect the roll-out of charging infrastructure to support this growth, with Mexico's energy regulator CFE having already invested $3 million in 100 charging stations. However, greater investment in charging will be necessary to support rapid market growth.

Mexico's Manufacturing Potential for Electric Vehicles

Major automotive companies are looking to Mexico to expand their EV manufacturing potential. Stellantis NV, owner of the brands Jeep, Peugeot, and Ram, is planning to renovate its plant in Saltillo, Coahuila, to construct EVs. Located about 200 miles from the Texas border, the factory is an ideal site for EV exports. Stellantis is currently deciding whether to invest in EV production at this location or instead at its Mexico State or Sonora facilities.

The investment is expected to run into the multibillion-dollar range. A spokesperson for the company, Shawn Morgan, stated: "We invest regularly in plants all around the world to upgrade in terms of process, vehicle production, or adapt to electrification as part of our $35 billion investment in electrification and software."

Mexico Delivers Its Own Electric Vehicle

It's not just foreign companies investing in Mexico's EV market; national companies are also looking to develop electric cars of their own. Zacua, the country's first electric car brand, was founded in 2017 by Jorge Martínez, a major in Mexico's car parking sector. In 2018, the company opened its first manufacturing facility in Puebla state, developing two EV models – the MX2 and MX3. Prices for the two cars start at $30,500, with subsidies of around $2,500 offered to consumers.

Zacua's EVs have a range of around 160 km, with batteries designed to last 3,000 complete charge cycles, giving users around 8 years of battery life. Martínez has faced significant challenges in getting Zacua off the ground, competing with well-known automakers for a share of Mexico's EV market.

The company's CEO, Nazareth Black, is confident about Zacua's potential, explaining, "Within the community, within an international industry experiencing [a shift to] Industry 4.0, we are a star, and many countries have come to learn about the project. We have that recognition."

Our Outlook

Mexico's EV market is growing steadily, and its strong automotive manufacturing industry positions it well to become an EV production hub. In addition, concerns around air pollution and carbon emissions mean that a shift to EVs, both for consumer vehicles and public transport, is likely to see robust growth over the next decade.