Global EV Transportation Review

Till recently, transport electrification was not a policy priority for the policy and regulatory structure. Thus, there are no specific directions that can indicate a path for transitioning to electric drivetrain. There have been some key policy announcements in context of the electric vehicle industry. An important one among them is the setting up of US-Mexico joint working group on transport electrification. Three sub-groups are set up within the overall working group for light-duty vehicles, medium- and heavy-duty vehicles and the electromobility in cities. The aim is to develop a roadmap.

In June 2022, President López Obrador announced 2030 as the targeted year by when at least 50% of all the vehicles manufactured will be fully electric or hybrid. There are a few tax benefits available for the electric vehicles (under the zero emission vehicle category) – a temporary import tax exemption till 2024 and waiver of tax on new vehicles. A few other incentives are available from local authorities, such as the exemption of charges for registration for owners of select vehicle categories or makes in the cities of Hidalgo, Morelos, Puebla, Querétaro, Tlaxcala, the State of Mexico and Mexico City.

The preferential tariff regime available under the country’s free trade agreement (FTA) with the US and Canada is the only major pull-factor from policy perspective. Under the FTA norms of sourcing, Mexican sourcing of vehicles’ components and parts enables certain advantages for companies operating in the trading jurisdiction. Also important in this context is the tax credit that the recent US Inflation Reduction Act allows on certain vehicle categories produced within the FTA member countries.

The manufacturing investment prospects in electric vehicles are not limited to the cars or light passenger modes. The heavy- duty commercial segment is finding similar serious interest. In September 2022, the heavy-duty commercial vehicle assembly company Navistar announced the production of battery electric truck at its Mexican production unit. The units produced were for delivery in the US and Canada. Scania and BYD are among the other major entities with electric truck offerings in the Mexican market. Scania was also among the earliest to set up a local electric bus manufacturing in Mexico. Volvo recently followed suit with local facility for buses.

Complementing the investment thrust in vehicles, the lagging charging infrastructure base shows signs of a rise in private sector interest. Lately, the company Evergo gained a significant place in this segment, with its acquisition of E-Drive, a charging service company in the country. In the coming years, Evergo plans an investment worth $200 million for setting up 15,000 new public and residential charging stations across the country. Its offerings include Level-2 AC charging (up to 20kW) and Level-3 DC charging (up to 600kW). In January, BMW partnered with Evergo for a planned 4,000 charging stations in Mexico over a five- year horizon and $200 million investment. The Enel Group’s planned $4 million project is another example of major private sector investments. The project involves setting up 25 charging stations and interconnection infrastructure for 51 electric buses at the Mexican capital city.

The Mexican electric vehicle ecosystem has a much bigger untapped investment opportunity in Lithium. Government’s estimates value the Lithium deposits found in the northern state of Sonora, at $600 billion. It is however subject to successful commercial mining, for which not much progress could be made. In April 2022, the government nationalized the country’s Lithium mining and processing activities, reserving it for a state-owned firm established in this regard. At the same time, the government has committed to honour the concessions granted prior to the nationalization.