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Mexico’s EV ambitions | The Economist

Jayob advertising Hinting it’s coming, but Tesla has yet to confirm recent reports that it will build a new EV (EV) “gigafactory” in the Mexican city of Monterrey, near the U.S. border. Still, the rumors started. Noah Itech, a Chinese supplier of automation equipment to US auto companies, is building a $100m factory in the city. If Elon Musk’s company is established in Mexico, it would be the latest in a long line of companies to choose to produce vehicles in the country adjacent to the world’s second-largest auto market.

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General Motors(General Motors) and Ford, as well as Japan’s Toyota and Nissan, have long produced cars for export in the country, especially since Mexico signed a free trade agreement with the US and Canada in 1993. By 2021, Mexico has become the world’s seventh-largest exporter of automakers. But will Mexico retain its appeal as the industry shifts from combustion engines to battery power?

Compared with China and Europe, the United States has been slow to adopt electric vehicles, but the demand for electric vehicles EVs is now growing rapidly, providing a ready market for cars made in Mexico.Many of Mexico’s strengths remain EVThat’s as much as the internal combustion engine, for example skilled labor is much cheaper than crossing the border. “Mexico is our first plant outside of Japan; the quality of the plant is extraordinary,” said Claudia Rodríguez of Nissan Mexico.

Some companies are retrofitting factories, and at least eight are already assembling EVin Mexico. One in the state of Mexico, where Ford builds the Mustang Mach-electronic (see picture), its output will triple EVs to 210,000 units. General Motors It is spending $1 billion to reconfigure a factory in Coahuila, near the Texas border, where it will build the new Chevrolet Blazer from 2024.It plans to convert two other factories into EV In production by 2035.Bombardier Recreational Products announced last October that it would build a new factory in Querétaro to make electric motorcycles and batteries EVSecond. Japanese company Nidec plans to invest about $715 million in a factory to make electric motors for battery-powered cars.

Other factors could prompt automakers to produce more cars and parts in Mexico than they do now, said José Zozaya, head of the trade body IMAI. Supply chain disruptions during the pandemic, as well as geopolitical tensions between the U.S. and China, are making companies think twice about relying on China for components and production. Automakers have long loved the flexibility and efficiency that comes with sourcing parts and bringing vehicles closer to their final destination.

Mexico also has large lithium reserves that could be used to make EV Battery. President Joe Biden’s Inflation Reduction Act (Irish Republican Army) stipulates that ultimately only battery-powered vehicles built using raw materials sourced and processed in the U.S. or a country with which it has a free trade agreement, such as Mexico, are eligible for subsidies. But it will take years for new mines to come online, and nationalization could delay further.

If it weren’t for the bumpy roads, car companies would probably invest more.Mexico’s goal is to have EVIt accounts for half of all car production by 2030. General MotorsThe boss in Mexico says 15% is more realistic. That’s because of a lack of motivation. When Tesla built its “Gigafactory” in Nevada in 2014, it received $1.3 billion in sweeteners from the state in the form of tax credits.this Irish Republican Army Also allocated $2 billion to help transform U.S. factories EV Production.

The whimsical approach to policymaking by Mexican President Andrés Manuel López Obrador is another red flag. Executives worry that the government will prioritize power generation by state-owned companies, which use mostly oil and gas and are more expensive than private-sector producers. If energy costs rise and supplies become uncertain, manufacturers say they may no longer view Mexico as a competitive production location.a few months later General Motors When it announced the factory transition in April 2021, it said it would not invest further in Mexico if the country’s laws did not encourage clean energy.

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