Mexico’s Electric Leap: Aiming to Rival Asia’s EV Dominance Amidst US Trade Tensions

Mexico is working on creating an affordable electric vehicle that could compete with low-cost options from China and India, despite potential challenges from trade regulations under Trump's administration.

During her first speech on October 1st, President Claudia Sheinbaum of Mexico announced that prototypes for the electric vehicle (EV) have been constructed, according to Bloomberg. Named Olinia, this initiative seeks to create local production networks for parts associated with EVs.

Sheinbaum announced plans to establish production networks ensuring all components for electric vehicles are domestically produced to minimize imports, as shared with Bloomberg and various news organizations during a press conference.

BYD Dolphin Electric Vehicle – European Specifications

Sheinbaum refrained from mentioning particular firms participating in the initiative, as highlighted in the report. However, she mentioned the existence of numerous Mexican companies currently producing parts like electric motors. She expressed the ambition to unite these manufacturers with local scientists to facilitate the construction of this electric car.

The entirely Mexican-produced electric vehicle is expected to rival Indian-made cars currently utilized as cabs in Mexico's southern regions. It would also contend with affordable Chinese vehicles, particularly from manufacturers such as BYD, which aims to expand its market in Mexico despite high-ranking officials promising to reduce imports from Asia, as reported by Bloomberg.

At present, Mexico is responsible for the production of a significant number of vehicles intended for the U.S. market each year, although the country itself purchases very few, particularly electric vehicles (EVs). General Motors has made substantial investments in their Mexican facility to make it a central location for EV production. On the other hand, BMW is in the process of enlarging its Mexican factory with plans to start producing EVs by 2027. Tesla, however, seemed to be evaluating Mexico as an option but has seemingly decided against it

Manufacturing Facility for BMW Group Located in San Luis Potosí, Mexico

The feasibility of a compact electric vehicle that could rival the most affordable options from India and China in the American market remains uncertain. Should such a vehicle be introduced in the U.S., it might be subject to hefty import duties, which would hinge on the results of the 2024 U.S. presidential race.

Donald Trump has vowed to impose a tariff of 100% on cars manufactured in Mexico and shipped to the U.S., regardless of whether they are electric vehicles. Additionally, Trump's approach suggests he might do away with the agreement formerly referred to as NAFTA. Is Mexico taking early defensive steps? Although Mexico's recently elected president hasn't explicitly acknowledged this, it seems likely.

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