How Mexico became an EV manufacturing hub
Despite its standing as a global auto manufacturing power, Mexico’s position as a hub for electric vehicles was far from given until recently.
Khodrocar - These days, carmakers such as Ford and Jetour, a Chinese brand, are either building manufacturing facilities or repurposing existing internal combustion engine (ICE) vehicle factories across Mexico.
But the country’s position as an electric vehicle (EV) manufacturing hub was far from a given until very recently. As late as November 2021, Francisco Garza, CEO of GM Mexico — the largest and oldest automaker in the country — put the country’s entire future automotive industry into question. "Unfortunately,” he said, "Mexico will not be an investment destination if local conditions will not allow us to meet our zero emissions goal.”
How was the country able to salvage its status as one of the world’s foremost carmakers and actually come out ahead? It is worth recapping the difficult road Mexico traveled in under two years.
In February 2021, the Mexican government approved a sweeping electricity reform that gave primacy to the state-run electric corporation over private alternatives, particularly ones generating power through renewable sources. Not only did car companies complain that they didn’t trust the state power company to provide a reliable supply of electricity to their factories but the new law also undermined green energy production by promoting "the dirtiest, most outdated and expensive” modes of power generation, according to the U.S. ambassador in Mexico City.
Companies worried that it seemed that far from being an ally in the road toward the green transition, the Mexican government would actively block it. It didn’t help that the country’s leader, President Andrés Manuel López Obrador, made the defense of national oil a point of pride for his administration.
As recently as June 13, 2022, López Obrador was saying that "speculators, those who manage the financial markets, and the experts who sold us the premature idea that oil was obsolete and that it was now the era of electric” had been wrong. The president’s public bearishness on EVs eventually led to a very open clash with the auto industry, resulting in the GM Mexico CEO’s expressions on the absence of the right conditions for investment in the country.
Meanwhile, spurred by the Build Back Better program, EV manufacturers started expanding in the U.S. This riled the Mexican government, which threatened legal action against the Biden administration in December 2021, alongside Canada. A month later, GM announced it was opening EV manufacturing operations in Michigan.
But a confluence of factors, including rising wages in China and continuously splintered supply chains, eventually spurred EV investment in Mexico afterall. Manufacturers got access to Mexico’s cheap labor and resources, and the government could tout Mexico’s expanding industrial prowess once again. Presidential hopeful Marcelo Ebrard loved touring EV plants as foreign minister, barely hiding his campaigning under the guise that he was inspecting foreign investment in the country. Even the president came around, making EV production a public policy priority.
Today, Mexico is full of news about new EV investments. BMW will be making cars in San Luis Potosí. GM is building a new factory in the northern state of Coahuila and plans to retrofit its existing factory in Silao for EV production. Ford makes its electric Mustangs in the state of Mexico, while Jetour will be making EVs in Guanajuato. And that’s not even mentioning the Tesla gigafactory in Monterrey, set to open in 2024.
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