Long distances, oilfields, and low salaries abound south of the Rio Bravo. If you ask me, it’s mainly these three conditions that have marked Latin America as one of the laggards in the EV transition.
Alas, all bad times should come to an end, and recent developments in the region start to show not a mere change in the winds (which was felt half a decade ago) but a windstorm, a hurricane even. Transitions take time, yet when they start, they tend to be swift, and the events that have taken place in the first two months of 2023 — from the industrial parks in Palomar to the Free Zones in Nuevo León — lead me to believe this year could be key on the momentum for the EV Revolution in LatAm. Let’s begin from the south:
Argentina: Chery will locally produce EVs, Stellantis plans massive investment to secure copper supply from 2027 onwards
Located in the so called “Lithium Triangle,” Argentina is poised to be one of the great winners as the world transitions to cleaner forms of mobility (so long as these keep being based upon lithium-ion batteries), and yet, plug-in market share is a mere fraction of a percentage, making it perhaps the least developed market amongst Latin America’s “wealthy” (or, at least, “not poor”) countries.
Like in Brazil, the reason is likely to be related to protectionism. Both Argentina and Brazil have heavily protected markets, and a very large percentage of their domestic vehicle consumption either comes from the country itself (60% in Argentina’s case), from Mercosur, or from countries which have some sort of quota, most of them located within the continent. And, as such, EVs are posed to be nearly non-existent until there’s some semblance of local production.
The Chinese company announced in February an investment of $400 million for the construction of a plant in a place not yet decided — but likely to be Santa Fe — to build batteries (in association with Gotion) and EVs. The plan is to produce up to 100,000 a year in 2030, first for the local market and then for abroad. This is not a novel development for the company, which has had a presence in Brazil following the same strategy and is likely expanding to Argentina to guarantee lithium supplies. It’s worth mentioning that Mauricio Macri’s company, Socma, has close links with Chery. Macri was Argentina’s president from 2015 to 2019. Whether that influenced the decision or not remains to be seen.
In a similar note, Carlos Tavares (Stellantis CEO) announced this month that the company will invest $155 million to become the second largest stock owner of McEwen Copper, and, specifically, to gain control over the Los Azules copper mine located in San Juan Province and part of Chile. This mine will produce 100,000 annual tons of copper from 2027 onwards, providing the company with enough material to sustain EV production according to the company’s objectives.
As of today, Stellantis has not made any announcements regarding EV production on Argentina. However, being the largest producer (and seller) in a heavily protected market, one would expect it would follow Chery’s lead and make use of local raw materials to maintain a presence there.
Brazil: BYD to built 3 factories in the country (one for LFP modules), Weg announces investment to increase battery production
Brazil’s news isn’t quite as big as Argentina’s, but it still denotes that changes are coming.
BYD, the Chinese EV giant, has had a truck factory in the country since 2016 and a battery one (in Manaos) since 2020. In late 2022, the company announced a $500 million investment in order to build three new factories: one for trucks and buses, one for vehicles, and one for LFP batteries. The sizes, sadly, are not yet known.
At the same time, Weg announced an undisclosed investment to increase battery production in Santa Catarina. At only 1 GWh, this isn’t really a gigafactory level we’re talking about … yet. Still, local production is crucial in such a protected market. Related to this is the locally produced Chery iCar, which is currently sold at a price of 149,990 BRL ($28,500).
Colombia: BYD shows interest in building an assembly plant, two new vehicles to arrive in 2023 at a sub-$22,000 price
In a recent interview, BYD’s General Manager in Colombia, Juan Luis Mesa, announced interest in building one or two new assembly plants in Latin America, with Colombia — being the company’s largest market in Latin America — being one of the countries considered for it. Government and media have showed great interest in this possibility, but countries with more developed industries, such as Mexico and Chile, are also being considered and the final location of the plant remains to be seen.
Regardless, BYD continues its commitment with the mobility transition and will bring two new vehicles to Colombia this year, one of which (the BYD Seagull) is expected to arrive at a price of 100 million COP ($21,000) or less.
Renault, the market share leader and one of the two producers of light vehicles in the country, also announced the arrival of the Renault Kwid E-Tech at prices yet undisclosed (but which should be known by the end of April). The Kwid E-Tech will compete with the BYD Seagull, the JAC E10X, and the Changan E-Star (Changan Benny in China), all of which are priced at around 100 million COP, and so one would expect a similar price. However, Renault’s vehicle will have important advantages over the competition: much bigger brand recognition and an already existing (and massively successful) ICE Kwid will make people much more likely to consider the EV as an option.
These two new arrivals don’t promise prices that could put them in direct competition with their ICE equivalents … yet. But the gap is closing. Only 4 years ago, the Renault Zoe was thrice more expensive than the similarly sized Renault Sandero. Nowadays, the Kwid E-Tech may cost only 80% more than it’s ICE counterpart, something that could easily be worth it with rising gasoline prices and the stiff restrictions for ICE vehicles in most large Colombian cities. Mark my words: it’s these vehicles that will spearhead the EV Revolution in markets such as this one, and the Kwid, if priced right, could well place BEV market share around 5% nearly on its own (it was 1.5% in 2022).
Mexico: Tesla announces a Gigafactory on Nuevo León. There’s more, but honestly that should be enough
And, at last, we come to Mexico.
By far the most industrially developed country in the region, Mexico’s car industry has grown at an unbelievable rate, nowadays being near the likes of France’s, South Korea’s, or even Germany’s car industry. And yet, like the US, Mexico has been a laggard in the transition, making many of us wonder if the industry would be doomed in the coming years as the world moves ahead.
These fears now seem to have been unfounded.
Turbocharged by Biden’s IRA, the Mexican industry seems to be bolting ahead of the competition anywhere outside of China, as the country welcomes EV investments at an astonishing rate. As a result of this new opportunity, Andrés Manuel López Obrador, Mexico’s President, has proposed the “Sonora Plan” as a means of promoting clean energy and increasing battery and EV production drastically in the following years.
And the results are telling. From nearly no EV and battery production in 2021 (the Ford Mustang Mach-E being the one exception), the country is now receiving investments from China, South Korea, and the US for battery cell production — and several automakers (Kia, Ford, GM, BMW, and Jetour, for now) are investing significant amounts in the production of EVs in the country. This, in turn, has made Jalisco a large supply center focused on BEV and PHEV requirements. And, of course, the discovery of lithium reserves in Sonora — already producing under Bacanora Lithium and Mexital Mining — add a local source for the most critical material in the supply chain.
But all this pales in comparison with Tesla’s announcement.
The construction of a new gigafactory in Nuevo Leon was originally fought by Lopez Obrador, who would’ve preferred Tesla invested in the under-developed south, where hydric resources are much more abundant. Yet it’s the north that’s home for most of the country’s industry, and at the end the president ceded and Tesla was allowed to build its factory where it originally wanted to.
Not much is known, yet, but most analysts seem to believe that this factory will be key for the sub-$25,000 vehicle Tesla has so long planned but not yet unveiled. According to Lopez Obrador, this will be Tesla’s biggest factory yet, and the fact that it’s Mexico — and not China — that is the likely producer of the cheapest Tesla model speaks volumes to the country’s industrial capabilities. (Though, the model may also be produced in China.)
With local production soon numbering in the tens of thousands, we all expect the Mexican EV market to rise rapidly, perhaps leading the region in the not-so-distant future. More important will be the role of cheap Mexican EVs in transforming the regional market, as most Latin American countries are at least partially dependent on Mexican cars and have some sort of trade agreements to allow easy import from that country.
And, as such, Mexico is likely to be the key for Latin American electrification.
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