Mexico Faces Additional Obstacles to Adapt Electromobility

The growing demand for EVs has spurred a new mindset among all industry participants. This change does not only represent the adoption of new technology but a complete makeover in how mobility is perceived as a whole. Mexico still has a long way to go before its vehicle park has a significant number of EsV but, while there is no country that has more EVs than ICE vehicles at the moment, this alternative is quickly disrupting operations for many actors in the automotive supply chain.

“The EV trend will continue and we will have to participate and understand how we contribute to it,” says Martin Toscano, CEO of Evonik. From a manufacturing perspective, the rise of EVs brings significant changes in materials, production techniques and labor specialization. Unlike ICE vehicles, electric cars have significantly fewer moving parts and do not require engine oil, transmission fluid, exhaust systems, fuel injectors or starters. As a result, the assembly process for EVs is simplified and labor costs are reduced. As these units become more mainstream and electric mobility seems to be the unified industry response toward a more sustainable sector, manufacturers of different ICE systems face uncertainty regarding the future of their operations.

The transition to EVs is expected to result in a net loss of 50,000 jobs in Europe, as a smaller labor force is required and demand shifts toward batteries and charging infrastructure, according to an analysis by BCG. The move is already happening, with companies like Ford recently announcing  plans to cut 3,800 jobs in Europe.

In addition to these global challenges, the Mexican automotive industry is grappling with a unique set of problems. The country’s vast geographic territory, coupled with insufficient cargo infrastructure, has created issues of reliability and mileage range for EV users, which were not a concern in the past. The need for reliable and sufficient charging infrastructure has become increasingly apparent, with many users hesitant to make the switch to EVs without reliable and widespread charging options.

Guillermo García Alcocer, former President of the Energy Regulatory Commission (CRE), estimates that the country needs to install around another 2,000 charging stations, representing around 38,000 charging points, over the next 20 years to meet the increasing demand for EVs in the country. 

García says that part of the necessary infrastructure could be installed at existing gas stations, particularly those with solar panels. “If we take into account that we have almost 13,000 gas stations in Mexico, then 2,000 of these would gradually need to be converted to have the availability of electricity necessary for this model to be viable," he said in an interview with Forbes México.

As of Oct. 7, 2022, Mexico had approximately 2,100 EV chargers spread across the country, reports the International Council on Clean Transportation. This figure is still far from the number that García deems necessary to meet the projected demand.  

What Is Holding Adoption Back?

The EY Mobility Consumer Index reports that 46% of potential EV buyers are motivated by environmental concerns, while 34% are attracted by the better performance offered by EVs in comparison to traditional gasoline and diesel vehicles. However, there are several factors hindering EV adoption, including the lack of charging stations (36%), insufficient information (34%), uncertain fees associated with charging (28%) and a lack of charging infrastructure at home or work (27%). 

Another important aspect that is keeping consumers from purchasing EVs is the higher initial cost (27%). According to Carlos Tavares, CEO of Stellantis, the production cost of electric cars is still about 40% higher than that of diesel and gasoline units and automakers have to bear this additional expense, putting the market in an unfavorable position, as reported by MBN. Tavares added that if the market continues to shrink, new plants would have to be closed and "some unpopular decisions will have to be made."

However, EVs appear to be a good option for transportation companies that are trying to reduce their fleet’s total cost of ownership (TCO), which considers other variables, such as resale value, fuel consumption and maintenance costs. Experts agree that this is one of the main advantages EVs can offer, as the combined effect of lower energy costs, simple repairs and fewer parts needed result in a reduced cost per kilometer driven.

“EVs offer many benefits and savings as their maintenance costs are lower and they have a lower use of braking pads. Electricity is also less expensive than fuel. As new emission standards evolve and the cost of batteries and electric engines falls, the TCO of EVs will gain more weight in customers’ decision-making,”  Frank Gundlach, Managing Director of Volkswagen Truck & Bus Mexico, told MBN.