Carmakers, Government, New Generations Could Lift Green Car Sales

From January to December 2022, 51,65 green cars were sold in Mexico, of which 40,859 units were hybrid, 5,631 electric, and 4,575 plug-in hybrids, according to data from the Mexican Association of the Automotive Industry (AMIA). This market segment accounted for 4.7% of domestic auto sales in 2022.

This figure is small when we compare it with other markets, such as the US, where green units represent 9.4% of vehicle sales, according to international indicators by country published by AMIA.

Even so, the evolution of the automotive sector in Mexico toward green cars is increasingly evident. According to data from AMIA, the growth in the placement of hybrid and electric vehicles has been continuous in recent years: in 2019, they represented 1.9% of the cars sold in the country, in 2020 2.6%, and in 2021 4.6%.

Several factors suggest that the growth trend will continue. On the one hand, this year, Tesla announced its decision to open a mega factory in the northern state of Nuevo Leon. As reported by the governor of this region, Samuel García Sepúlveda, the investment will exceed US$6 billion and the US assembly company seeks to build the plant in record time, or less than a year.

This news is part of the nearshoring phenomenon that is benefiting Mexico as a commercial ally of the US  in several commercial sectors, but especially in automotive manufacturing, due to its border location compared to Asian giants. Along with Tesla, automakers such as General Motors, Ford Motor, BMW, Volkswagen's Audi unit and Zacua are also producing green cars in Mexico or have plans to do so.

The other factor is the Mexican government, which intends that by 2030 half of the cars sold in the country will be green. One of the candidates to succeed Andrés Manuel López Obrador as President of the Republic in 2024, Marcelo Ebrard, has already revealed his intentions, to the point that he recently visited the area where the American brand plans to establish itself in Nuevo Leon. For her part, Claudia Sheinbaun, who is also emerging as a possible candidate to succeed the current president, is an advocate for environmental measures.

A third factor is the arrival in Mexico of new models for sale in this segment from both Asian and American brands. Just a few weeks ago, ARRA announced its arrival in Mexico. It is a new American manufacturer of electric cars that will market several models in our country.

Although the commitment of automakers like Tesla to the production of green cars in Mexico, the government's intention to change the vehicle fleet and the new models marketed in Mexico could boost sales in the country, the reality is that there are still some brakes, such as the availability of charging stations and the high prices of the units.

In fact, of all the units marketed in the country, electric vehicles only represented 0.5% of national sales. The cost of acquiring a vehicle can range from MX$443,100 (US$24,000) for a Toyota Prius Base, the best-selling vehicle in this segment, to over MX$1 million (US$55,000) for high-end brands, such as Tesla, BMW, Audi, Porsche and Mercedes.

Taking into account that the green car culture is nascent in our country, leasing is positioned as a very comfortable alternative for the user to test this type of vehicle before deciding to purchase and thus clear up their doubts regarding its operation.

According to data from the Mexican Association of Vehicle Lessors (AMAVe), between January and September 2022, purchases by lessors of hybrid and electric vehicles represented 4% of the total.

The new generations of Mexicans are also more aware of the environmental impact. Comscore's Competitive Environment of the Internet Automotive Industry in Mexico report indicates that millennials (born between 1981 and 1996), who are expected to make up 50% of the workforce, are not interested in buying. They prefer to pay only for the use of the vehicle, either through leasing or through mobility platforms. Among the main reasons, there is the cost of acquiring and maintaining it, and for another, because they are waiting for a car that is “EACSY” (its acronym in English): electric, autonomous, connected, shared and annually updated.

Operating a green car can mean savings of more than 10,000 pesos by not having to pay for fuel, in addition to savings of between MX$10,000 and MX$11,000 (US$550-US$600) in possession and verification, since these types of vehicles are exempt. There are more and more options to economize on the operation of an electric car, from free charging stations in shopping centers, to charging at home through solar panels providing 100% clean and free energy, which could generate savings of up to MX$30,000 a year against a fuel car.