The imminent arrival of Tesla in Mexico, with the installation of its new Gigafactory in Monterrey, Nuevo León, will mark the beginning of a new era in the country, and in Latin America.
Mexico will be the spearhead for the electric car throughout the region. “Decades of investment in the automotive industry have given the country a strong auto manufacturing ecosystem“, assured UBS in an analysis entitled “The future of electric vehicles in Mexico-Investing in Mexico”
The problem is that most of the industry’s output is for internal combustion engine vehicles, Therefore, it will be necessary to transform the productive capacity of Mexico so that the country plays a leading role worldwide.and this will require a lot of financial resources.
It is not a secret that our country has unique advantages that could help consolidate its position in this new stage for the automotive industry.
“But, one of the main challenges for Mexico is its ability to meet the country’s growing energy demand. This requires significant investments by the government, which in turn would imply loans that could be too high. Therefore, UBS believes that public-private partnerships will play a key role in helping Mexico to take advantage of the emerging opportunity of electric vehicles”.
In other words, the concern reflected in the UBS analysis consists of the need for financial flows that allow the country to evolve from the era of the traditional automobile to the electric one, which will require heavy investments to reconvert an entire industry or even raise some pillars from scratch. .
Lithium, rising demand
Lithium, for example, will play an essential role in the transition to electric vehicles, its demand is expected to increase significantly in the coming years.
According to official figures from the Mexican government, ours is the tenth largest lithium reserves in the world, with 1.7 million tons. However, there is currently no commercial exploitation project in the country, all rather are in the exploration phase.
So far, the only lithium deposit with proven reserves is in Sonora and the participation of the private sector will be essential for its exploitation.
The photovoltaic solar potential is also notorious. UBS notes that the government has launched an ambitious plan to develop solar plants in the state, which includes adding up to 5 gigawatts of new power generation capacity.
All of the above is part of a broader plan called Plan Sonora, which involves an investment of 48 billion dollars over the next seven years, in order to strengthen supply chains with the United States and transform Sonora into a manufacturing hub for batteries for electric vehicles.
But the question that UBS is asking is: How will Plan Sonora be financed? Some funds from entities such as the North American Development Bank, a binational institution established to finance environmental infrastructure projects on the common border, could be part of the solution, but not all.
The resources required are much largerthe participation of private, public and development bank financing is necessary.
the other earrings
UBS highlights the fact that Mexico is going in the right direction in several ways and the fact of being chosen as the host country for the first electric car production plant in the region demonstrates this; however, the country has several pending issues that it must resolve in order to consolidate itself in the industry in general and in the electric car sector in particular.
UBS forcefully points out some of the areas where Mexico needs to improve and, in fact, they come as no surprise.
“The country needs to invest in infrastructure, stop organized crime and corruption. reduce bureaucracy, promote science and technology education, keep pace with technology and digitization, and improve the perception that the country is a safe place to do business and that it has clear rules,” the authors of the analysis point out.
Since the ability to generate clean, competitive and reliable energy is a condition for Mexico to maintain its leadership and boost the country’s economic growth, it is necessary to improve this industry.
Therefore, UBS concludes that private investment will be key so that the country can take advantage of the opportunities presented by the transition to electric cars.