| Mexico | Nov 09, 2022
A lack of charging stations and the high cost of electric vehicles are inhibiting the transition away from combustion engines. But as a major manufacturer of cars, Mexico has a lot of potential.
Scarce charging infrastructure and the price of electric vehicles are two of the main problems facing the electrification of Mexico’s transportation systems.
Mexico is one of the world’s largest vehicle manufacturers. With 3.1 million units manufactured in 2021, the country is the seventh largest vehicle producer in the world, accounting for approximately 4% of global production. That position as a manufacturer makes the country a key point for the transition from legacy combustion vehicles to electric vehicles; however, there is still a long way to go for Mexico on the adoption of green transportation systems.
In 2021, 1.1 million new cars were sold in Mexico, but only 45,939, or 4.6% of the total, were electric, hybrid, or plug-in hybrid units, according to data from the statistics institute Inegi. These are still small numbers compared to other markets such as China, where some 3.3 million battery electric and plug-in hybrid cars were sold in 2021, or 15% of the 21.48 million passenger cars sold that year. In the US, 667,731 electric vehicles were sold in 2021, while 328,000 were sold in Germany, figures that show the work Mexico still has to do to make progress in this market.
“In Mexico, there is a fleet of around 32 million cars, traditional, hybrid, and electric. Before the pandemic, it sold more than 1.5 million vehicles annually,” said Nazareth Black, CEO of Zacua, a small car manufacturer based in Mexico City. As the first Mexican manufacturer of electric vehicles, Zacua plays a key role in the country’s transition to electrification.
“As a Mexican assembly company, we wanted to be the pioneers of this subject for our country,” she said. With its small electric vehicles, this company wants to contribute to the fact that Mexico is called to maintain its leading position as a manufacturer also in the electric vehicle segment due to its proximity to the US, its experience, its well-structured production chain, and the fact that it has some of the most important lithium mines in the world, a key mineral for the development of electric batteries.
But when it comes to electric vehicle adoption, several challenges remain. The Ministry of Energy estimates in its Prodesen electric system development roadmap that by 2036 there will be 4.9 million electric vehicles in circulation. This would mean that approximately 15% of the means of transportation in Mexico in about 15 years will be electric, hybrid, plug-in hybrid, or electric buses.
Currently 39% of Mexicans are willing to buy a hybrid vehicle, but only 15% would buy a 100% electric vehicle, according to analysis by the consulting firm J.D. Power. According to those surveyed, the two biggest challenges for this market to grow are the existence of few charging stations and the price of electric vehicles. The lack of infrastructure also translates into a shortage of repair shops, which can also mean the need to purchase more expensive parts compared to traditional vehicles.
“Moving to electric transportation is an urgent issue and a must-do. Mexico also has to work on the recharging infrastructure as well as raising overall awareness. We also need to develop special payment plans so people can buy them, as they are more expensive than gas-powered ones,” said Black. In Mexico, seven out of 10 cars are sold on credit, however, Black says that there are currently no special financing plans designed exclusively for electric cars, so the firm is working to increase access to credit for this type of vehicle. “We offer financial services with company called Car Fast Financial, and we developed an eight-year plan for electric cars. We also have to work on public policies and some inner incentives,” she added.
This slow implementation of electric vehicles is not unique to Mexico, but is something shared with the rest of Latin America. “The US will be 40% electric by 2030. Mexico and Latin America will take a while longer,” said José Román, President and Managing Director at Nissan Mexicana. “Electrification can’t happen simply because we, as automotive companies, launch the necessary technology. There are three legs to this chair. The first is the client, the second is the government, and third comes the company,” Román said.
According to these three areas that have to work together to advance in this area, Roman indicates that Latin American governments have not yet made a wide deployment of charging stations to help the adoption of these means of transport. In his view, electrification is not a priority for governments in the region, which is why the company has decided to focus primarily on selling hybrid vehicles at affordable prices to consumers. “The first solution we came up with not so long ago was to launch the hybrid: The Nissan X-Trail. What we are planning to do is to install electrification technologies in much cheaper cars. We want to bring democracy to electrification. Electrification will arrive in Mexico but won’t be fully implemented for at least another decade,” Román concluded.