Mexico City — Nearshoring is attracting investment in Mexico’s automotive industry with a focus on the electric vehicle segment, with a view to turning the country into the electric ‘motor’ of the United States’ auto industry.
The arrival of investments is taking place under the USMCA, the free trade agreement between Mexico, the United States and Canada, as well as Mexico’s and the US’ commitments to reduce greenhouse gas emissions by 2030, and is based on the bid to harness Mexico’s competitive advantages, according to executives at auto parts manufacturer Stellantis, General Motors, Mitsubishi, Mexican electric vehicle maker Zacua, and other players in the auto parts industry in Mexico.
German, Swiss, Spanish and North American companies are relocating from China to Mexico to seek better access to the US market and accelerate the move towards the manufacture of electric vehicles.
With a production of 3.1 million cars per year, Mexico is the seventh-largest car producer in the world, a position it must maintain and even improve, but must also move forward with the electric vehicle segment, according to industry executives who participated in the XX International Automotive Industry Congress in Mexico.
Carlos Zarlenga, president of Stellantis Mexico, said that there is no other emerging country in the world with such an opportunity in terms of nearshoring as Mexico, since it has an export profile that includes efficiency, quality, labor costs and competitiveness, and because it is a major supplier to the US market.
“Mexico’s focus is not the electrification of the domestic market, which is important and must be done, but rather the most important thing for Mexico at this time is investments to manufacture and export electric vehicles, which is why Mexico is unique, because we already have a developed market that is providing electrification, and that is the United States.”Carlos Zarlenga, president of Stellantis México
The president of Stellantis, a leading global automaker, said that this is a time of decisions regarding how to expand the sector of the manufacture and assembly of batteries and electric motors, with suppliers and with the changes that will occur with the conversion of plants.
Mexico’s Economy Ministry tweeted on November 18 that Economy Minister Raquel Buenrostro met with executives from Stellantis to explain the “excellent conditions for investing in Mexico and relocate plants to convert cars from internal combustion engines to electric, generating great demand for specialized jobs”.
Francisco González, executive president of Mexico’s auto parts industry association INA, says that the companies that are arriving in Mexico have a “strong” focus on electromobility.
He pointed out that the companies that are coming to the country are not only here to invest in the physical part of the vehicles, such as metals, rubber or plastics, but are also relocating companies that work in software development, since electric cars requires new technologies.
The electric vehicle industry needs more than nearshoring
Francisco Garza, president and CEO of General Motors Mexico, says that while the internal combustion engine is the one currently driving the automotive industry, in the next few years it will be electric vehicles, under the USMCA.
For this conversion to happen, he said, technology must be developed to move towards electrification, which will entail the transformation of manufacturing plants and will require the support of suppliers.
Garza indicated that General Motors will begin the transition in 2023 until 2035, which implies a mix of internal combustion vehicle production until reaching a 100% electric portfolio.
The goal is that, by 2040, all GM’s manufacturing and supplier base operations will be carbon neutral.
The GM plant located in Ramos Arizpe, in Coahuila state, which borders the US, is one of the automaker’s five plants globally that will convert from internal combustion engine vehicle manufacturing to an electric vehicle manufacturing center.
Nazareth Black, CEO of Zacua Mexico, says that Mexico has to move fast in making decisions and minimize the chances of mistakes, and that decisions have to have a sustainable basis.
Jorge Vallejo, president and CEO of Mitsubishi Motors de México, says the arrival of companies with nearshoring focused on electromobility requires support and planning between both the industry and the government.
In fact, he adds, a new legal framework and regulations are needed to be accompanied by the state in this reconversion.
“Federal, state and municipal incentives are needed. Business planning for five or six years is required. A whole new business model needs to be developed with new players”Jorge Vallejo, president and CEO of Mitsubishi Motors de México