Mexico is making significant strides in the electric vehicle (EV) market, with a strong push from the government and increasing consumer interest. This article will explore the current state of the EV market in Mexico, the government’s initiatives, and the challenges and opportunities that lie ahead.
The Rise of Electric Vehicles in Mexico
The Mexican EV market is experiencing substantial growth, with sales figures and investment showing the country’s commitment to a greener future.
Market Growth and Projections
- Rapid Expansion: Mexico’s electric car market is projected to grow from $0.69 billion USD in 2025 to $4.11 billion USD by 2029, with a compound annual growth rate (CAGR) of 56.07% during this period.
- Sales Surge: In 2022, electric car sales in Mexico skyrocketed by 1090% compared to 2017.
- Continued Growth: From January to November 2024, sales of hybrid, plug-in hybrid, and fully electric vehicles increased by 70.2% compared to the same period in 2023, with a total of 108,943 units sold.
- Market Share: As of November 2024, hybrid and electric vehicle sales reached 8.2% of total vehicle sales, with hybrid vehicles accounting for 79%, fully electric cars for 14%, and plug-in hybrids for 7%.
- Future Projections: The Electric Vehicles market in Mexico is projected to grow by 9.02% annually between 2025 and 2029, reaching a market volume of US$53.4 billion by 2029. Unit sales are expected to reach 56.77k vehicles by 2029.
- Leading Sales: Mexico City leads in sales of hybrid and electric cars, concentrating 25.8% of total units sold. The State of Mexico and Nuevo Leon follow, with 928 and 703 units sold, respectively in January 2024.
Government Initiatives and Subsidies
The Mexican government is actively promoting the adoption of EVs through various incentives and policies.
The “Olinia” Project
- Affordable EV: The Mexican government is pushing forward with an affordable electric vehicle project called “Olinia,” meaning “movement” in the indigenous Nahuatl language.
- Made in Mexico: The Olinia is designed and built in Mexico and is intended to be an ultra-compact electric car.
- Price Point: The base price of the Olinia is targeted between 90,000 and 150,000 pesos, approximately $4,400 and $7,300 USD.
- Simple Design: The vehicle is designed to be rechargeable using a conventional household socket rather than a dedicated charging station, making it more accessible.
- Production Location: One of the production facilities for the Olinia will be in the state of Sonora.
- Target Market: The Olinia is positioned to compete with small motorbikes and entry-level EVs from India and China.
Other Government Incentives
- Tax Exemptions: New electric vehicles are exempt from paying tariffs, while used ones have a series of reductions.
- Import Tax Exemption: A temporary import tax exemption for electric vehicles has been granted until 2024.
- Federal Tax Exemption: Electric vehicles are exempt from the federal tax on new cars (ISAN).
- Income Tax Deductions: The Income Tax Law allows for deductions of up to $250,000 Mexican pesos on the original investment amount for electric vehicles. Businesses can also deduct up to 25% of ISR for investments in electric bicycles and motorcycles.
- ISR Reduction: There is a reduction of up to 285 pesos per day per vehicle from ISR for the use or temporary enjoyment of cars powered by rechargeable electric batteries.
- Payroll Tax Reduction: The state of Nuevo León offers a reduction in payroll tax of up to 95% to assembly companies that invest in the electromobility sector. Direct suppliers can receive up to a 70% discount, while indirect suppliers receive a 30% reduction.
- EV Charging Infrastructure: The government announced plans to invest USD 38 million in 2022 for electric vehicle charging station infrastructure. The Federal Electricity Commission (CFE) also offers free installation of meters for charging stations.
Key Players and Investments
- Tesla: Announced a $5 billion investment to establish an EV manufacturing hub near Monterrey, with plans to produce one million vehicles annually.
- Jetour: Committed a $3 billion investment in the Bajío region, solidifying Mexico’s role in the EV market.
- BYD: Expects to sell 50,000 EVs in Mexico in 2024 and 100,000 in 2025 and will announce the location of its first plant in Mexico by the end of the year. The plant is planned to produce 150,000 vehicles in its first phase and an additional 150,000 in the second phase.
- Other Brands: Major brands like Audi, Volkswagen, BMW, GM, Ford, Toyota, and JAC are also introducing new EV models in Mexico.
Challenges in the Mexican EV Market
While the EV market in Mexico is growing rapidly, it faces several challenges.
Charging Infrastructure
- Limited Availability: Despite the growth, Mexico has a limited number of charging stations. There are approximately 42,915 chargers in the country, with 3,273 being public and 39,642 being private as of September 2024.
- Uneven Distribution: Most charging stations are located in major cities such as Mexico City, with many states having very few charging points.
- Need for Expansion: A significant expansion of charging infrastructure is needed to accommodate the projected surge in EV adoption.
- Public vs Private: The majority of chargers are private, highlighting the need for more public charging infrastructure.
Cost and Consumer Adoption
- High Costs: High costs remain a barrier to widespread EV adoption, making it difficult for EVs to reach the mainstream.
- Consumer Reluctance: There is still reluctance among fleet customers to switch to EVs, despite growing interest from individual consumers.
Other Challenges
- US Pressure: The United States government is pressuring Mexico to withhold incentives from Chinese EV manufacturers due to concerns about competition and national security.
- Tariffs: While Mexico is working to attract foreign investment, potential tariffs on Mexican imports could hinder the growth of the EV sector.
Opportunities in the Mexican EV Market
Despite the challenges, the Mexican EV market offers several opportunities for growth and development.
Growing Demand
- Increased Sales: Sales of EVs have been increasing consistently with a 74.6% growth in sales recorded in January 2024 compared to the same month the previous year.
- E-commerce Growth: The expanding e-commerce sector is driving the demand for electric commercial vehicles (ECVs).
- Sustainability Push: The government’s push for sustainable cargo transportation is also fueling demand for ECVs.
Investment and Manufacturing
- Foreign Investment: Mexico is attracting significant foreign investment in the EV sector, with major players like Tesla and BYD setting up manufacturing facilities.
- Local Manufacturing: The Olinia project aims to establish Mexico as a producer of affordable EVs, reducing reliance on imports.
- Job Creation: Investments in the EV sector are expected to create new jobs and stimulate economic growth.
Sustainability and Environmental Benefits
- Emission Reduction: The adoption of EVs can significantly reduce greenhouse gas emissions, contributing to a cleaner environment.
- Government Goals: The Mexican government’s goal to ban diesel vehicles by 2025 further highlights its commitment to sustainable transportation.
- Public Awareness: There is growing public awareness of the environmental benefits of EVs.
The Future of EVs in Mexico
Mexico is poised to become a major player in the global EV market. With continued government support, increasing investment, and a growing charging infrastructure, the future of EVs in Mexico looks promising. While challenges remain, the opportunities for growth and development are substantial, positioning Mexico as a leader in sustainable mobility in Latin America. The country’s commitment to reducing emissions, attracting foreign investment, and promoting local manufacturing is setting the stage for a significant transformation in the automotive industry.
