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, with more than one million people employed in the sector. But as carbon emissions become more of a concern and major cities are battling against 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 vehicles, with a further 5.1 million registered in neighboring Mexico State. But as an increasing number of people are moving 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 in circulation. 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 uptake of EVs 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, which will be supported by increased clean electricity production.
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 around 200 miles from the Texas border, the factory provides the ideal site for EV exports. Stellantis is currently deciding whether to invest in EV production in 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 that are investing in Mexico’s EV market as national companies are 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 for 3,000 full charge cycles, giving users around eight years of battery life. Martínez has faced major challenges in getting Zacua off the ground, competing with well-known automakers for its share of the Mexican 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.”
Mexico’s EV market is growing at a steady rate, and we believe its strong automotive manufacturing industry makes it well-positioned 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.