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Mexico Creates Electrification Group but Incentives are Needed

By Alfonso Núñez | Thu, 03/10/2022 - 16:48

To facilitate the national transition toward electromobility, Mexico’s government launched a work group to develop a binational route toward transport electrification alongside the US. But industry experts warn that these efforts will not be sufficient without fiscal incentives.

 

US Deputy Secretary of Energy David Turk said that the US and Mexico can become global leaders in the rapidly growing EV market. “We are happy to work with the Mexican government to advance their climate goals and create a competitive and diversified clean energy economy,” Secretary Turk said. Mexico’s Minister of External Relations Marcelo Ebrad, said that plans for the electrification group began during the “Three Amigos Summit,” in which North American leaders met for the first time in five years.

 

One of the topics discussed during the summit was the controversial tax credit proposal for US-union manufactured EVs, which was included in US President Joe Biden’s Build Back Better Act. The up to US$12,500 incentives have been largely opposed by the Mexican and Canadian governments, which are currently also arguing with the US on USMCA's auto parts origin percentage. While controversial, the US’s proposed incentives might be the missing link in Mexico’s delayed sustainable transition.

 

Miguel Elizalde, President, National Association for the Manufacturing of Buses, Trucks and Tractors (ANPACT) believes more work has to be done to strengthen the internal market for energetic infrastructure. Particularly, the country can make strides by increasing EV chargers across the country and take inspiration from the leading EV markets by adopting incentives for the manufacture and purchase of these vehicles.

 

“There would have to be mirrored incentives in Mexico, meaning that if a country (the US) has many incentives and another does not, manufacturing will go where incentives are. We already have a competition,” said Elizalde.

 

According to Luz Elena del Castillo, General Director and President, Ford Mexico, only 1,400 EVs were sold in Mexico during 2021. This can be linked to the lack of chargers in the country, which only has 300 chargers with a total of 600 connections, and the “luxury vehicle” high prices keeping customers away from purchasing more EV and hybrid models. However, the lack of fiscal incentives behind the adaptation of sustainable practices and product manufacturing is another considerable factor behind Mexico’s delayed participation in the electrification of the automotive industry.

 

Other areas of opportunity lay in conventional and renewable economic power generation, natural gas availability and a current tax incentive giving companies that invest in renewable energy a 30 percent deduction in first year taxes, said Hans Kohlsdorf, Founding Partner, E2M, during Mexico Automotive Summit 2021’s “Decarbonizing the Automotive Supply Chain” panel.

 

Photo by:   Unsplash, myenergi
Alfonso Núñez Alfonso Núñez Journalist & Industry Analyst