{"id":3041,"date":"2020-11-20T17:10:02","date_gmt":"2020-11-20T23:10:02","guid":{"rendered":"http:\/\/accesstomexico.mx\/blog\/?p=3041"},"modified":"2020-11-20T17:10:02","modified_gmt":"2020-11-20T23:10:02","slug":"joe-bidens-influence-on-the-mexican-automotive-industry","status":"publish","type":"post","link":"https:\/\/accesstomexico.mx\/blog\/joe-bidens-influence-on-the-mexican-automotive-industry\/","title":{"rendered":"Joe Biden\u2019s Influence on the Mexican Automotive Industry."},"content":{"rendered":"\n
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MEXICO BUSINESS NEWS<\/a><\/p>\n\n\n\n

As Joe Biden gest ready to enter office next January, his bet on clean energy, EV development, and US manufacturing jobs will echo in the Mexican auto industry. This piece presents a full analysis of the new US president-elect policies regarding the automotive sector.<\/em><\/p>\n\n\n\n

On Nov. 7, Joe Biden obtained the electoral votes needed to became the 46th president of the US. Almost 79 million people voted for the Biden-Harris formula and its ambitious agenda to “restore the soul of America.”<\/p>\n\n\n\n

As part of the president-elect’s agenda, plans were drafted regarding “a clean energy revolution,” “modern, sustainable infrastructure,” “buying American and manufacturing in America” and “ensuring the future is ‘made in all of America.” Although it is hard to know if these plans will remain as they are now, key drivers will have a meaningful influence on the Mexican automotive industry.<\/p>\n\n\n\n

“Experts agree that the arrival of Joe Biden to the US presidency will eliminate the obstacles that prevent the energy sector from flourishing while aligning federal projects to sustainability standards. The electrification of the US economy, not only in the automotive sector, can benefit Mexico as it usually mirrors US policies,\u201d Armando Z\u00fa\u00f1iga, President of Mexico City’s COPARMEX<\/strong>, a civil association that gathers top employers from different sectors, told MBN. \u201cThrough USMCA, a window of opportunity can be opened to bring EV manufacturing investments to Mexico.”<\/p>\n\n\n\n

The new president-elect\u2019s plans involving the automotive value chain \u2013 and indirectly the Mexican automotive industry \u2013 are focused on two major areas. First, his \u201cclean energy revolution\u201d <\/strong>will unquestionably promote government policies that foster the use of heavy and light electric vehicles. This includes building the necessary charging infrastructure, battery technology research, and domestic production for the initiative to be successful.<\/p>\n\n\n\n

Biden\u2019s second focus will be on production and supply chains<\/strong>. During his campaign, Biden presented the new \u201cMade in America\u201d tax credit \u201cto save and create manufacturing jobs,\u201d which in essence aims to counter offshoring practices to bring more manufacturing plants back to the US. In Biden\u2019s words: \u201cUS manufacturing was the arsenal of democracy during World War II and must be part of the arsenal of American prosperity today, fueling an economic recovery for working families.\u201d<\/p>\n\n\n\n

Quest for a \u201cClean Energy Revolution\u201d<\/strong><\/p>\n\n\n\n

Biden\u2019s approach toward climate change played a central role while in the campaign as it was a trigger, especially among young voters. The role of electric mobility in tackling carbon emissions is central for the incoming administration. Biden aims to \u201cuse the federal government procurement system to drive toward 100 percent clean energy and zero-emissions vehicles,” while accelerating their deployment. Regarding the latter, the plan is to boost EV charging infrastructure, which Biden considers a key barrier for EV market development. The goal is to have 500,000 new public charging points by the end of 2030. Clean energy commitments extend to heavy vehicles, as well. By 2030, all buses built in the US are expected to be emissions-free. Moreover, 500,000 school buses will be converted to newer, cleaner technologies.<\/p>\n\n\n\n

During Biden\u2019s campaign, the Clean Cars for America initiative was also launched in which senators and some industry-related organizations delivered a proposal to restore tax incentives for EVs. \u201cBiden will restore the fully electric vehicle tax credit to incentivize the purchase of these vehicles. He will ensure the tax credit is designed to target middle-class consumers and, to the greatest extent possible, to prioritize the purchase of vehicles made in America,\u201d Biden platform stated<\/a>.<\/p>\n\n\n\n

\u201cIt is clear Biden is in favor of clean energy so electrification will be a key topic,\u201d Carmen Hern\u00e1ndez, President of the Jalisco Automotive Cluster<\/strong>, told MBN. Mart\u00edn Toscano, President of Evonik M\u00e9xico<\/strong>, a leading provider of chemical products, also agrees: \u201cBiden announced the US\u2019 return to the Paris Climate Agreement from Day 1. He also said he would revoke President Donald Trump\u2019s executive orders against climate change policies. This sets a clear path toward environmental protection, sustainability, and efficiency, as well as positive technologies and trends regarding energy use. The electrification of the automotive industry will find more support from now on.\u201d<\/p>\n\n\n\n

A strong stance from the US when it comes to clean energy and reducing carbon emissions will oppose Mexican President L\u00f3pez Obrador\u2019s energy policies, which so far favor oil production and refinement, leaving clean energy promotion aside. The Wall Street Journal has called it Mexico\u2019s \u201cassault\u201d on energy investors. However, USMCA stands in the way as it predominantly favors clean energies. “We see a polite foreign policy. However, we ought to pay close attention to environment-related topics,” said Hern\u00e1ndez.<\/p>\n\n\n\n

For ZF Services\u2019 General Manager <\/strong>Gerardo Varela, a Biden administration will \u201cbring exponential growth for electric vehicles, which will lead to the development of regional suppliers, Mexico included. There will be a stronger pressure for USMCA members to meet their commitments regarding clean energy development and better working conditions.\u201d<\/p>\n\n\n\n

Electrification of North American Supply Chains<\/strong><\/p>\n\n\n\n

The clean energy revolution goes hand-in-hand with the incoming US administration\u2019s plan to \u201cposition the American auto industry to win the 21st century.\u201d Apart from EV promotion, the plan also focuses on strengthening the US\u2019 position in EV manufacturing, \u201cto be the global leader in the production of electric vehicles and their inputs, materials, and parts.\u201d By expanding manufacturing capacities, 1 million new jobs are expected to be created in the US.<\/p>\n\n\n\n

The \u201cMade in America\u201d tax credit plays a central role in this strategy. The 10 percent advanceable tax credit is intended for companies investing in the US. Investments include but are not limited to revitalizing existing closed or closing facilities, retooling any facility toward advanced manufacturing competitiveness and employment, reshoring job-creating production to the US, expanding or broadening US facilities to grow employment in the US, and expanding manufacturing payroll, according to Biden\u2019s campaign site.<\/p>\n\n\n\n

Bringing production back to the US is not an unreachable goal. Richard Fischer, SVP Strategy Volkswagen North America & Volkswagen Group<\/strong>, said during Reuters Automotive Event on Nov. 13 that \u201cthe further away of the plant suppliers are, the more CO2 is created in transportation. Discussions are going on with suppliers to move their production location closer to where our production facilities are.\u201d<\/p>\n\n\n\n

Components for EV manufacturing present challenges not only in engineering and design but also in their manufacturing. \u201cInstead of a traditional powertrain, electric vehicles have a battery tray that is taking processes and materials to the next level. Some are in the development stage and are not standardized as with internal combustion engine vehicles. Moreover, there are differences among battery trays from Tesla, Daimler, or Ford. OEMs are conducting most of these developments and processes in-house and this will remain the case for a while,\u201d said Sergio Bautista Robotics & Discrete Automation Director of ABB M\u00e9xico<\/strong>, during an interview <\/a>with MBN.<\/p>\n\n\n\n

With tax breaks, R&D funds are increased and advanced manufacturing capabilities are in place, which makes Biden\u2019s ambitious goals plausible. Mexico can also gain from these strategies should the right measures are set in place. \u201cBiden has announced investments for the modernization of infrastructure and the energy sector, which added to initiatives to strengthen supply chains and US national value, will likely have a positive impact on Mexico as well. US foreign trade policy is expected to favor import tariffs and raw material and technology imports through a more competitive scheme. An increase in US competitiveness will help North America as a whole,\u201d said Toscano.<\/p>\n\n\n\n

\u201cBiden will spur development of EV supply chains, which will help Mexico to a great extent given its developed capacity in the automotive industry. Given its geographic location, the country will become more attractive. Automotive clusters have already been proactive to adapt as fast as possible to electromobility needs,\u201d Nazareth Black, CEO of Mexican EV OEM Zacua<\/strong>, told MBN.<\/p>\n\n\n\n

Where Does the Mexican Automotive Industry Stand?<\/strong><\/p>\n\n\n\n

Electric vehicles have not fared as well in Mexico as in the US. Between 2016, when records began, and August 2020, only 76,307 electric and hybrid vehicles were sold in the country, which represents less than 2 percent of the total sales in that same period, according to data from INEGI. Meanwhile, the production of hybrid and electric vehicles in Mexico has just begun. Ford\u2019s electric SUV, the Mustang Mach-E, is the first fully EV to be assembled in the country, besides Zacua. Some hybrid models are already manufactured in the country, as well.<\/p>\n\n\n\n

When it comes to auto part production, the scenario is quite different. Manufacturing components for EV and hybrid vehicles is something the country is already familiar with. Fernando Trujillo, Principal Consultant at IHS Markit<\/strong>, detailed during a webinar <\/a>organized by the UK Embassy that powertrain is the key sector for the Mexican automotive industry. According to the firm, about 50 percent of engines produced in Mexico are exported, while “hybrid technology production is increasing its foundation with about 83,000 hybrid engines for domestic production and about 194,000 hybrid engines for exports.” IHS Markit expects that as more OEMs add battery electric vehicles (BEVs) and hybrid electric vehicles (HEVs) to their lineup, there will be more opportunities to grow the electric vehicle supply chain.<\/p>\n\n\n\n

As Biden presses the accelerator toward vehicle electrification, vehicle production and auto part production in Mexico will eventually follow along. Although the incoming US president stresses the importance of creating 1 million jobs in the US based on electric vehicle-related technologies and components, it is unlikely that companies will reshore their operations from Mexico back to the US. Should tensions with China alleviate, USMCA \u2013 which Biden has shown no opposition to \u2013 provides a framework for a stronger automotive supply chain in North America.<\/p>\n\n\n\n

As the transition continues, Mexico\u2019s relationship with its main trade partner should be closely followed. Common strategies can be designed between Mexico, the US, and automakers to contribute to their emission reduction goals by bringing production closer to their facilities. Mexican players should also prepare for a considerable increase in EV vehicle demand in the US. The fact that automotive clusters are already focusing on the electrification of the automotive supply chain sends the right signals toward the future of the Mexican automotive industry.<\/p>\n\n\n\n

Alejandro Enr\u00edquez. (2020). Joe Biden\u2019s Influence on the Mexican Automotive Industry. M\u00e9xico. Mexico Business News. Recuperado de <\/strong><\/p>\n\n\n\n

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