Iker Jiménez
Director General for Global Investment
Impulso Económico Global
/
Expert Contributor

US-Mexico Task Force for the Electrification of Transport

By Iker Jiménez | Tue, 08/02/2022 - 15:00

The automotive industry is one of the main pillars of Mexico’s economic development. The country has been among the world’s largest automotive manufacturing economies for the last three decades and is the fourth-leading exporter and seventh-ranked producer[1]. This sector represents 3.0 percent of total Gross Domestic Product (GDP) and 16 percent of Mexico's manufacturing GDP[2]. Additionally, last year, the national automotive and auto parts industry received around US$5.4 billion in foreign direct investment[3].

Mexico’s skilled labor force, geographic location and network of free-trade agreements have made the automotive sector an important export platform for the country. Nevertheless, the outlook is not encouraging: car sales in the first months of the year were the lowest in a decade, according to INEGI data[4]

Among the issues that have led to the low performance of the industry and that will undoubtedly continue to affect its results, at least for the remainder of the year, are: i) the scarcity of semiconductors and the drop in automobile production; ii) the recent regularization of used cars coming from abroad; iii) the volatility in the price of automotive components, such as steel and aluminum; and iv) lower vehicle demand from the US[5].

In summary, the automotive industry is changing and, at the same time, the world is experiencing profound changes due to international conflicts, the need for an economic and sustainable recovery after the COVID-19 pandemic, and the reconfiguration of global value chains with the emergence of concepts such as near- and ally-shoring.

Global Perspective on Electric Vehicles (EVs)

In addition to the changes that society is experiencing due to the pandemic and other factors, the automotive sector is in a disruptive moment: the transitioning to electromobility. According to the Global EV Outlook, published this year by the International Energy Agency, in the best-case scenario, it is estimated that by 2030 approximately 30 percent of new vehicles sold around the world will be electric. Furthermore, the global market value of this new industry is projected to reach US$190 billion by that year.

To put this rapid increase into perspective, around 120,000 electric vehicles were sold in 2012 and by 2021, more than that were sold each week. Today, nearly 10 percent of car sales are electric, with sales in China representing half of that growth. For instance, in 2021, more EVs were sold in China (3.3 million) than in the entire world[6].

However, the economic growth and opportunities of this new industry have not been equal as developing countries are still lagging behind in the manufacturing and sales of EVs, where few models are available or remain unaffordable.

US-Mexico Task Force for the Electrification of Transport

The Mexican Ministry of Foreign Affairs (MoFA) understands that the country needs to accelerate its transition to electric car manufacturing if it wants to retain its leadership in this industry. For that reason, the MoFA in collaboration with the University of California's Mexico Alliance has created the US-Mexico Task Force for the Electrification of Transport, a high-level binational initiative.

This project aims to support the automotive industry in both countries in the transition to electric vehicle manufacturing and, thus, strengthen the regional economic integration in this sector. The project will present a binational roadmap, with a one-year horizon, which will be written by academic experts from the University of California and will be presented in November 2022 by the MoFA Undersecretary for Multilateral Affairs and Human Rights at the United Nations Framework Convention on Climate Change (COP27). 

The roadmap will be composed of two parts. The first will provide a diagnosis of the global and regional transition to electromobility, detailing the situation and opportunities for Mexico and the US in this industry. The second part will introduce recommendations based on the analysis conducted in the first phase. To achieve this roadmap, the project has been guided by working sessions under five thematic axes: 1. Innovation; 2. Human Capital; 3. Supplier Development; 4. Infrastructure; and 5. Governance. The Task Force promotes intersectoral collaboration through a triple-helix perspective; that is, it includes relevant actors from government, industry, and academia, both from Mexico and the US.

On the Mexican side, different ministries and subnational governments have actively participated in the project, particularly the Ministry of Economy, the Federal Electricity Commission (CFE), the Ministry of Infrastructure, Communications and Transportation and the Ministry of Labor and Social Welfare. Also, more than 15 automotive segments, six universities and several civil organizations have been key players in the development of the initiative. The US government has also been represented through the US Embassy in Mexico, the State Department and the Ministry of Energy, as well as civil servants from the state of California.

After being officially launched in February 2022, the first phase of the project has been completed and has resulted – through an open and safe dialogue – in a solid diagnosis of the opportunities, challenges, and advantages of the electric automotive industry in both countries. The second part of the project will start in August and will be based on finding joint recommendations.

Thus, by promoting the development of the industry to transition to electromobility, the MoFA pushes for the fulfillment of the 2030 agenda, particularly the SDG 7, by opting for non-fossil fuels; SDG 8, by promoting value-added industries that generate wealth and employment; SDG 9, by stimulating the advancement of the Mexican industry with notions of innovation and infrastructure adaptations for electric vehicles; and SDG 17, by involving actors of the triple helix in a coordinated effort.

The mission-oriented work at the MoFA is focused on achieving results that advance economic and social well-being in the country. Mexico has all the tools to move forward and once again demonstrate its leadership in this industry.

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In collaboration with Jorge Jiménez Sólomon

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[1] See: https://latambusinessnetwork.ch/the-automotive-industry-in-mexico/

[2] See: https://www.inegi.org.mx/contenidos/productos/prod_serv/contenidos/espanol/bvinegi/productos/nueva_estruc/702825079963.pdf

[3] See: https://es.statista.com/temas/6404/la-industria-automotriz-en-mexico/#topicHeader__wrapper

[4] Mexico’s national institution of statistics and geography.

[5] See: https://www2.deloitte.com/mx/es/pages/dnoticias/articles/desafios-para-la-industria-automotriz-2022.html

[6] See: https://www.iea.org/reports/global-ev-outlook-2022

Photo by:   Iker Jiménez