Framework Proposal to Accelerate Electrification of Transport

For the first time in its history, Mexico has a female president. This is certainly a milestone that we should celebrate, not only because of the impact it will have on future generations but also because it opens the door to a different method of executing policies in the country. President-elect Claudia Sheinbaum happens to be a climate scientist who collaborated with the IPCC. She was also a former minister of the environment and then mayor of Mexico City, during a period of profound transformation of the transport systems in  the city that led to the first electrification projects of mass transit.

For this reason, in conjunction with the Mexican Association for the Promotion of Electric Vehicles (AMIVE), we are proposing a framework to the incoming government with the sole objective of creating an ecosystem that allows an inclusive, flexible, and efficient transformation of public transport and last-mile delivery logistics to electric vehicles. This document is the result of years of discussions with several government officials, private companies, policymakers, and customers in general, and tries to condense in a straightforward manner where we should focus as a country with regard to transport decarbonization, in search of a better future for our next generations.

The electrification of public transport must be a top priority for the government. Not only does it provide the opportunity to reduce around a quarter of the country’s CO2 emissions while improving air quality in cities, but it is a driver of economic development. Mexico is lagging behind Brazil, Chile, and Colombia in the introduction of electric buses in public transport fleets.

This article will focus on three key elements and present ideas on how we can advance and create policies around those: education, regulatory framework and public policy mostly focused on mass transportation and on last-mile logistics, and incentives and financial mechanisms.

Education is key for a new industry to flourish and also to maintain the competitiveness of Mexican engineers and technicians for the EV era. Unfortunately, the academic offer for this sector is quite limited, leaving very few options right now for students to focus their studies in areas that are relevant to electric vehicles. In my last article, we discussed in some detail where we should focus to increase our competitiveness. The government should lead these efforts by providing a strong push and investment in technical schools, focusing on improving and preparing future technicians, and also focus on disseminating knowledge around electric vehicles and electrification that allows companies and individuals to make decisions faster.

Regarding the regulatory framework and public policy needed for the sector, we've seen few and scattered propositions from the government to establish a strong framework that allows all the federal ministries, government officials, and companies to work together toward the creation of regulations that eliminate uncertainty in the market regarding safety, competition, and efficiency. We believe that a national EV strategy would serve as a country-level baseline of what is to come and where to focus efforts from different areas while providing clarity about roles and responsibilities within government institutions at the national and state levels.

SEMARNAT is championing the publication of such a document. The National Strategy for Electric Mobility (ENME) is the result of hundreds of hours of dedication from key actors from all sectors who are interested in pushing electrification of transport in the country to achieve the climate goals Mexico has committed to internationally. It also provides a clear roadmap to focus efforts in the short, medium, and long term to achieve these objectives. Additionally, it is important that the government is able to create a task force that coordinates the creation of similar documents from other ministries because SEMARNAT's competencies are limited. This task force will significantly accelerate the creation of such strategies in the short term, allowing the government to promote policies that push electrification forward, including a plan to deploy and regulate charging infrastructure across the Mexican territory.

In the area of incentives, reducing financial uncertainty is key to support cities and companies in their transition to EVs. We've seen the benefits in other countries such as Norway, China, Chile, Colombia, and the United States around the government promoting clear incentives that allow purchases to have a reduced risk. Incentives should focus on promoting the electrification of last-mile delivery operations in large cities by investing heavily in improving electrical distribution grids, helping public entities to understand the steps that need to be taken to prepare the country for the upcoming electrification, allowing better competition in the market for local OEMs, and establishing clear objectives for emissions reductions in specific cities, such as Mexico City, Guadalajara, and Monterrey, that benefit the public in the short term.

Finally, we must also create financial mechanisms that open the door for everyday people, SMEs, and local governments to finance their transition to electric mobility with the lowest capital cost available. Transitioning to electric buses for public transport is a financial undertaking. Unfortunately, we must finance a higher capex for the vehicle and charging infrastructure with the objective to return such investment over time with the associated lower operating cost. To accelerate the electrification of public transport and last-mile delivery logistics in Mexico, a multifaceted approach to financial mechanisms is essential. Drawing inspiration from Chile's success, where Santiago deployed a large fleet of electric buses through innovative financing models and public-private partnerships, Mexico could adopt similar strategies. These may include securing payment guarantees for new electric vehicles, engaging new financial actors, and developing viable financial models for vehicle procurement. Additionally, Colombia's experience with Bogota's large-scale integration of electric buses into its TransMilenio fleet, supported by tools like the Future Mobility Calculator, offers valuable insights. This tool helped assess the costs and benefits of transport electrification, guiding the planning for e-bus infrastructure. For Mexico, establishing a public investment fund for e-buses, as done in Colombia, could address the higher upfront costs of electric buses compared to conventional vehicles. Furthermore, technical assistance for infrastructure requirements, investments, and the creation of an electrification plan are crucial steps that Mexico can implement. By leveraging lessons from these case studies, Mexico can develop a robust framework for financing the transition to a greener and more sustainable public transport system.

I strongly believe Mexico has a bright future and huge potential for electrification in the upcoming years. Both companies and associations like AMIVE will play a pivotal role in making this happen as fast as possible.