Recently, Mexico’s automotive industry, long revered as a global powerhouse, has undergone a remarkable transformation. The Latin American country has evolved from a traditional internal combustion engine (ICE) manufacturing hub to a burgeoning center for electric vehicle (EV) production. In fact, EV manufacturing in Mexico is set to quickly become a major hub for both North and South American EV markets.
Initially, there was some skepticism and challenges surrounding this transformation. Still, Mexico has successfully positioned itself as a key player in the rapidly expanding EV market. And in the process, they’ve attracted a significant level of investments and reshaped their industrial landscape.
Not long ago, doubts loomed over Mexico’s ability to embrace the electric vehicle revolution. As late as November 2021, CEO Francisco Garza of GM Mexico cast uncertainty over the country’s automotive future, citing concerns about meeting zero emissions goals. However, after a sequence of strategic reforms and a shift in the global dynamics, Mexico has experienced a remarkable turnaround.
In February 2021, Mexico initiated sweeping electricity reforms, prioritizing state-run utilities and energy independence, despite initial industry apprehension. Initially, this move raised concerns about hindering green energy initiatives. But subsequent developments signaled a change in direction. Despite public skepticism from President Andrés Manuel López Obrador, Mexico’s automotive industry surged forward, fueled by a combination of economic imperatives and political recalibration.
Most carmakers tend to agree that electric cars will play a huge role in the future of the automotive industry. And today, Mexico stands as a beacon of EV manufacturing, attracting major players from around the globe. The landscape is marked by a flurry of activity, and established automakers and even emerging Chinese giants are eyeing Mexico as a strategic hub for EV production.
American automakers such as Ford and GM are not just investing in retooling existing facilities but are also constructing new manufacturing plants dedicated to EV production across Mexico. Ford is already assembling their electric Mustangs in the state of Mexico. And GM is actually expanding its footprint with a new factory in Coahuila. The automotive giant also plans to retrofit existing facilities for EV manufacturing in Mexico.
Meanwhile, Chinese EV manufacturers, recognizing Mexico’s potential as a gateway to the lucrative US market, are making significant strides. Leading Chinese companies like MG, BYD, and Chery, are in talks to establish EV factories in Mexico and leverage the country’s robust automotive ecosystem and favorable trade agreements.
Recognizing that EV manufacturing in Mexico is the future, country officials and industry leaders are collaborating to prepare for much higher demand.
The allure of Mexico for EV manufacturing isn’t just because of its geographical proximity to the US market. Mexico truly has a formidable automotive ecosystem already in place. And what’s more, Mexico enjoys modern infrastructure, integrated supply chains, and an extensive network of free trade agreements that combine to make it an ideal destination for EV production. The country boasts:
Recent investments underscore Mexico’s growing prominence in the EV landscape. General Motors is injecting $1 billion into its Mexican operations, while Ford has redirected funds from its Ohio plant to bolster its Mexico facilities. International players like Bosch of Germany are reaffirming their commitment to Mexico with substantial investments, further solidifying its position as a global automotive hub.
In tandem with industry investments, Mexico’s EV manufacturing capabilities are poised for exponential growth. Projections indicate a sustained annual growth rate of 25% in EV and hybrid production, positioning Mexico to dominate Latin America’s EV output in the coming years.
Tesla, the renowned electric vehicle pioneer, is currently building a gigafactory, set to begin production in 2026 near Monterrey. The monumental investment, ranging from $5 to $10 billion USD, underscores Tesla’s commitment to expanding its global footprint and tapping into Mexico’s burgeoning EV market. With its state-of-the-art facilities and cutting-edge technology, the Tesla gigafactory is poised to revolutionize Mexico’s automotive landscape, further solidifying the country’s position as a powerhouse in the electric vehicle industry.
As leading EV manufacturers from around the world eye Mexico for expansion, the stage is set for a new chapter in Mexico’s automotive legacy. Thanks to its competitive labor costs, streamlined regulatory environment, and strategic location, Mexico is currently emerging as a major player in the global EV market. And now is the time when forward-thinking companies are laying the groundwork to capitalize on this market shift.
Not everyone is building wholly owned gigafactories or pouring billions of dollars into new factories there, though. In fact, many are exploiting this opportunity by establishing relationships and processes with contract manufacturers in Mexico. Others are finding they can take advantage of Mexico’s EV manufacturing capacity under the umbrella of a shelter service.
Whatever path is right for each EV producer, they all agree that Mexico is the new frontier for automotive manufacturing. Mexico’s journey from skepticism to leadership in EV manufacturing epitomizes its resilience and adaptability in an ever-evolving industry. As the world accelerates towards an electrified future, Mexico stands ready to shape the automotive landscape for generations to come.
