Summary
- Mexico is developing its own EV manufacturing and supply chain to reduce imports
- They aim to domestically produce all components for the electric car called Olinia
- The Mexican government plans to work with local companies and researchers for the EV project
- Despite competition from Indian and Chinese imports, Mexico hopes to establish a presence in the EV market
- Mexico’s efforts may be preemptive against potential Trump tariffs on Mexican-made vehicles
Article
Mexico is making efforts to develop its own electric vehicle (EV) manufacturing and supply chain. Currently, global automakers operate plants in Mexico that assemble EVs and other vehicles for the U.S. market. This initiative can be seen as a preemptive measure against potential tariff policies from the U.S. government, under former President Donald Trump.
In her inaugural address on October 1, Mexican President Claudia Sheinbaum announced the development of a small electric car called Olinia, designed to rival cheap imports from China and India. Prototypes of the EV have already been built, with the goal of establishing domestic supply chains for EV-related components. The aim is to manufacture the entire electric car domestically and minimize imports, ultimately reducing dependence on foreign markets.
While specific companies involved in the Olinia project were not named, President Sheinbaum mentioned that there are already Mexican manufacturers producing electric motors. The plan is to collaborate with Mexican researchers to assemble the all-Mexican EV. This initiative is expected to compete with Indian imports utilized as taxis in southern Mexico, as well as low-cost Chinese imports from companies like BYD, which is looking to expand its sales in Mexico despite promises to limit Asian imports.
Mexico currently produces a large number of vehicles for the U.S. market, including many EVs from companies like GM and BMW. However, Mexico itself purchases few of these vehicles, especially in the EV segment. GM has heavily invested in its Mexico plant for EV assembly, while BMW is planning to start manufacturing EVs in Mexico by 2027. Tesla had considered Mexico as well, but it seems to have decided against setting up operations in the country.
The viability of a small Mexican-made EV competing against the cheapest Indian and Chinese models in the U.S. market is uncertain. If the Olinia were to be sold in the U.S., it could potentially face steep tariffs, depending on the outcome of the 2024 U.S. presidential election. Former President Trump had proposed a 100% tariff on Mexico-built vehicles, regardless of them being EVs or not. This policy could also impact the continuity of what was previously known as the North American Free Trade Agreement (NAFTA).
While President Sheinbaum has not specifically mentioned Mexico’s moves as preemptive against potential U.S. tariffs, it is likely that they are. Developing a domestic EV industry would not only boost Mexico’s economy but also safeguard against any trade restrictions from the U.S. government. With the global shift towards electric vehicles, Mexico’s focus on manufacturing and supply chain development in this sector could position the country as a key player in the future of automotive production.
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