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To Advance Electromobility, Look to Energy, Road Infrastructure

By Roberto Ballinez - HR Ratings
Sr. Executive Director of Public Finance and Infrastructure

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By Roberto Ballinez | Director - Tue, 05/09/2023 - 15:00

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According to the World Resources Institute, the transportation sector worldwide ranks second among the sectors that generate the most greenhouse gas emissions (GHGs). In addition, it also consumes more than half of the world's demand for oil. In fact, around 20% of global GHG emissions come from this sector.

Under this scenario, during COP26 held in Glasgow in 2021, around 38 countries (including Mexico) agreed to replace their vehicle fleet with electric vehicles (EVs) by 2035. Since then, some countries have implemented public policies to speed up the process of decarbonization of the sector, seeking to reduce carbon emissions by around 45% by 2030 and meet the net-zero carbon emission goal by 2050. Along with this, global EV sales have increased exponentially in recent years, going from around 55,000 vehicles sold in 2011 to approximately 7 million in 2021.

Even though the international agreements and the growth of the EV market are good news, in my opinion, there is a long way to go toward full electromobility. The automotive industry is beginning to transform rapidly to meet this demand; however, it is essential that governments promote public policies that accompany and encourage this change.

In the case of Mexico, for us to take advantage of the structural change in the market, along with the opportunities of nearshoring and the Inflation Reduction Act (subsidy policy in the US), it is necessary to invest a large amount of financial resources and promote technological innovation. In other words, to reap the benefits of electromobility we need modern energy and road infrastructure.

Certainly, our country has some advantages to carry out this transformation. For example, Mexico is the world’s seventh-leading producer of cars (of all types) and No. 1t in Latin America. In addition, we have the competitive advantage of being a country bordering the US, whose demand for EVs is growing. Besides, we have auto parts companies that provide inputs for domestic production and also export to other parts of the world. Also, our automotive industry represents approximately 20% of our GDP and 32% of our exports.

Let's begin by assessing our energy infrastructure. The result of this exercise invariably leads us to recognize the need to increase the production of electricity through renewable sources. Of course, this implies investment in new technologies, such as energy storage systems to control the intermittency of this type of generation and reduce its impact once they are incorporated into the grid, as well as the modernization of the transmission infrastructure. All this would guarantee that the energy used for the manufacturing and use of EVs comes from clean energy sources and, therefore, we would minimize our carbon footprint.

To increase the participation of renewable energies in our energy matrix, in my opinion, public policy must recognize the role of private investment and the value of the Rule of Law as key elements to improve the competitiveness and growth of our energy sector. Likewise, this strategy would complement the work carried out by CFE.

Now, evaluating our road infrastructure, I agree with those who say that the biggest challenge for adopting zero-emission technologies, in particular EVs, is that there is no reliable charging infrastructure to use the EVs. Obviously, in Mexico there is a deficit in the number of charging stations both on highways and in cities.

In Mexico, there are approximately 1,500 charging stations. Around 70% are from the public sector and the remainder are from the private sector. Most of these charging stations are located in Mexico City, Nuevo Leon, and Aguascalientes. In sum, these states concentrate 50% of the total. In contrast, China has around 2.2 million charging stations, while in some countries of the European Union there are five charging points per 100km2. In the Canadian province of Quebec, car drivers have 3,000 charging stations, while in the state of New York, they have close to 9,000.

We all know the EV market growth dilemma related to charging stations: not enough charging stations are built due to the number of EVs on the road, but at the same time, not as many EVs are sold due to the lack of charging infrastructure. This is where the promotion of long-term public policies should make a difference.

Having said this, among the pending tasks in our country are: 1) build more charging stations in cities (especially public ones), but also on roads and highways. The goal would be to have an efficient and reliable road infrastructure; 2) guarantee that the energy used to manufacture EVs and to power the charging stations comes from renewable sources; and 3) invest in technological innovation to lower the cost of converting engines that use fossil fuels (gasoline and diesel) to electric or hybrid. Likewise, we must also develop and promote processes to recycle used batteries.

To progress in these tasks, we necessarily must align public policies with technological innovation. In addition, as I mentioned before, the transition to electromobility will require a large amount of financial resources. Therefore, we should look for new sources of financing (public or private) to develop these projects and we should also consider international financing programs, such as those of the Inter-American Development Bank (IDB) or the World Bank.

Finally, according to Mexico’s Foreign Minister, Marcelo Ebrard, the government wants zero-emission vehicles to represent half of the cars sold in the country by 2030. This seems to be the beginning of a long-term federal electromobility policy that, in his words, will make Mexico take advantage of this opportunity and boost our competitiveness. Likewise, in my opinion, this would also help us to develop an internal market for the sale and purchase of EVs, since today, the production of EVs from the main automotive companies is mostly exported. 

In 2022, EVs represented only 0.5% of total domestic vehicle sales in our country, according to the Mexican Association of the Automotive Industry, while the percentage in the US was around 5.8%, according to the consultancy Motor Intelligence. If we consider hybrid vehicles, Mexico reaches 4.7%, but this percentage remains below the US, even when only considering EV sales there.

Photo by:   Roberto Ballinez

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