With its proximity to the large US automotive market and trade advantages like low labor costs, Mexico has long been an auto manufacturing hub for international brands. Now the global transition to electric vehicles is opening up new investment opportunities as companies build EV supply chains. Mexico’s government aims for EVs to comprise over half of auto production by 2030. Highlights include Nidec’s new $715 million EV motor plant and GM’s $1 billion investment to convert an existing facility to EV output. However, policy uncertainty on clean energy adoption poses risks. Overall, the emerging EV industry coupled with Mexico’s existing strengths make it an attractive option for auto-related investment.
Mexico’s auto sector advantages also apply to EVs, and demand is rising
Mexico has been a major manufacturing center for automakers targeting exports to the large US market next door. Brands like GM, Ford and Nissan have operated Mexican plants for decades, with exports surging after NAFTA began in 1993. By 2021 Mexico became the world’s 7th largest vehicle producer. Now as EVs gain market share, Mexico offers similar benefits for their production like low wages and proximity to US consumers. While the US lagged on EV adoption initially, demand is now expanding rapidly and providing a ready domestic market for Mexican-made EVs. Mexico also retains advantages around skilled labor and economies of scale. For example, Nissan says its existing manufacturing expertise was a reason to start EV output there.
New plants show investment ramping up for EV components and assembly
Mexico is already home to multiple EV assembly plants, with more in development. Ford is tripling Mustang Mach-E production at its Mexico state facility to 210,000 units annually. GM is spending $1 billion to retool an existing Mexican plant for EV production, starting with the Chevrolet Blazer EV in 2024. It plans to convert two other plants by 2035 as well. New EV-related plants are also being built, like Nidec’s $715 million factory to supply electric motor parts. The government aims for over half of Mexico’s auto output to be EVs by 2030. However, GM believes a 15% share by then is more realistic, showing there is room for further growth.
Policy uncertainties around clean energy present risks
While Mexico’s advantages for auto manufacturing apply to EVs, risks exist from policy uncertainties. Automakers have warned that clean and affordable energy supplies are crucial for competitive EV production. However, President AMLO’s nationalistic approach to the energy industry, favoring state fossil fuel producers, creates doubts around the future clean energy mix. GM has said it won’t invest further in Mexico without policies encouraging renewable adoption. So while Mexico’s established auto strengths make it an attractive EV investment option, questions exist on the government’s commitment to an enabling policy environment.
Mexico’s proximity to the large US auto market, trade benefits and skilled workforce give it inherent advantages as an EV manufacturing location. With consumer demand rising, companies are already ramping up investments in Mexican EV production and supply chains. However, uncertainties around clean energy policy pose some risks. Overall, the emerging EV industry coupled with Mexico’s existing auto strengths make it an appealing destination for investment.