Electromobility is skyrocketing. The steep price reduction on Li-ion batteries is enabling an impressive development and implementation of Electric Vehicles (EV) worldwide. China is the World leader, followed by European countries, and the U.S. with aggressive plans for catching up.

Mexico is the 5^th worldwide vehicle manufacturer, producing around 3.6 million vehicles per year. It is a strong player in the global automotive industry, with more than 50 million registered motor vehicles in circulation, out of which 34.3 million are automobiles, 728 thousand buses, 10.7 million trucks, and 4.3 million motorcycles. Moreover, given that it is the second largest economy in Latin America, it is a country with a huge potential for the EV industry.

Key trends

Vehicles’ sales in Mexico are showing the same trend as the rest of the World: car’s sales numbers are dropping since 2017. In 2020, due to COVID-19 crisis, the electromobility market experienced a steep decline. During 2021 numbers have shown a similar declining pattern. The effect of the chip shortages, as well as the silicon crisis, which is expected to continue at least during the following 6 months, have contributed to a production decline of 26% in October 2021.

Despite the production drop, plug-in hybrids (PIH) and pure battery electric vehicles (BEV) sales are growing at double digits rates, even with a limited supply offer of BEV’s: JAC E Sei1 & E Sei1 Cargo, JAC E Sei2, JAC E Sei4, JAC E Sunray Carga, JAC E X350, Zacua MX3, Renault Kangoo ZE, Chevrolet Bolt, Nissan Leaf, Tesla Model 3, Tesla Model Y, Tesla Model S, Tesla Model X, BMW i3, Mercedes Benz EQC, Audi e-Tron, Jaguar I-Pace, and the Porsche Taycan. There are some other models available in the market, but with incipient commercialization channels: Jiayuan JY7222-ZQR, ByD T3 and GML GF-900ME.

Public entities incentives

• E-sticker: Mexico City and the State of Mexico provide a special sticker to identify EV’s.
• Ecologic vehicle plates: This plate is provided to identify exclusively hybrid and BEV’s.
• EcoTag: Special RFI Tag to offer a 20% discount at the toll freeways in Mexico City.
• Additional electric meter: CFE provides an independent meter to bill the energy used by the residential EV charging infrastructure with a special tariff, this will keep the domestic consumption level out of the domestic high-level tariff, which is the most expensive one for this market segment.
• Preferential parking spaces: ChargeNow and many commercial locations in Mexico City offer special parking slots with or without free charging for plugin hybrids and BEV’s.

Benefits and exemptions

• New Vehicle Tax exemption: EV’s don’t pay the ISAN, for a Tesla Model 3 is around $6,000 USD.
• Annual ownership Tax exemption: EV’s don’t pay the ownership tax in most States, in the State of Mexico the exemption is for the first five years, from the sixth year, they pay 50% of that tax.
• Emissions’ control exemption: EV’s are not required to go through the emissions control campaigns, and they have no restrictions during high level pollution days.
• Charging infrastructure’s tax deductions: Public access charging stations capex can be deducted up to 30% of the income tax.
• Import tariffs exemption: EV’s manufactured by OEM’s registered in the automotive competitiveness decree, don’t pay import tariffs.

The e-mobility landscape 

Mexico, apart from its strong vehicle manufacturing capacity, has very strategic geographic location, 12 free trade agreements with more than 46 countries, a highly qualified working force and lower income levels than most OECD member countries. All these characteristics create the perfect scenario for Original Equipment Manufacturers (OEMs) already located in Mexico – VW, Audi, Kia, Renault/Nissan, GM – to develop and convert their current plants into EV manufacturing facilities.

In fact, Ford is manufacturing the Ford Mustang Mach-E in its plant in Cuautitlán, and the State of Nuevo León is aiming to attract new foreign investment from EV suppliers, such as the Korean company TS, which manufactures electric motors components. Moreover, Questum, a Mexican vehicle component manufacturer based in Nuevo León, is developing a project to manufacture E.GO vehicles in Mexico. This project is attracting more than 450 local suppliers.

Forecast

North America’s batteries manufacturing capacity infrastructure is expected to grow up to 400 GWh per year in the next three to four years. However, the expected demand in the same period will be around 508 GWh by 2030, so there’s still room for new announcements.

Source: BNEF, and company announcements

There are other novel startups in the Mexican EV market, like Vemo, Digital-Drive Technik, e-Drive, as well as some larger companies, such as Element Fleet Management, Potencia Industrial, amongst others, devoting their efforts to offer innovative technical and commercial solutions for the mobility electrification transition.

Charging Infrastructure overview

With more than 85% of the market share and more than 10,000 chargers installed worldwide, providing more than 5 million charging sessions so far, e-Drive is the main developer of public charging infrastructure in Mexico. Their main clients are ChargeNow, Tesla, the Electric Corridor Puebla-SLP, Tesla Superchargers, Tesla Destination, Porsche Turbo Chargers, CFE, and several commercial fleets.

e-Drive developed the infrastructure for ChargeNow, the alliance between Nissan and BMW to offer public charging in Mexico to their customers. This alliance has established more than 500 charging points at BMW’s and Nissan’s dealerships, public, and semi-public locations in Mexico. Besides, Tesla charging infrastructure is one of the most reliable and widespread in Mexico, offering more than 1,500 destination chargers and more than 25 superchargers stations across the main routes.

Value Chain

Overall, the emerging EV industry in Mexico offers vast opportunities, but also some challenges. Adapting the actual value chain to the new mobility requirements is not an easy task and it needs clear policy signals to provide certainty. This would allow and incentivize the private sector to invest on this transition, mitigating some of the risks that it entails.

Vehicle demand is increasing, but the vehicle offer is still limited. Vehicles such as trucks class 3-5 for last-mile delivery, taxis, and public buses, have huge market potential. Furthermore, the charging infrastructure requires sound investments to reinforce the electric grid, providing a window of opportunity to increase the penetration level of renewables and energy storage while transitioning to smart grids and distributed generation.

If you have a technology that fits within the Mexican electromobility sector or you want to know more, do not hesitate to contact us. 

Email: mexico@lowcarbonbusinessaction.eu

Website: mexico.lowcarbonbusinessaction.eu