The electrification of transport is underway on all continents, but it is not advancing at the same rate in all markets. Mexico, a laggard in transport electrification, is now showing signs of waking up to the challenge. After years of implementing lax fuel economy regulations for light-duty vehicles (LDVs) and removing import taxes on electric vehicles only temporarily, government action in favor of electric vehicles has suddenly accelerated:
- In April, the government recognized lithium as a strategic mineral and announced that its value chain would be managed exclusively by a new public entity.
- June 17thePresident López Obrador announced that 50% of the vehicles produced in 2030 will be zero emissions (ZEV).
- Multi-stakeholder working groups led by the Ministry of Foreign Affairs and the Ministry of Economy are examining an electrification roadmap.
- High-level discussions between the US and Mexico are taking place in multiple international forums to coordinate efforts against climate change and promote regional supply chains for electric vehicles.
These are all solid steps in the right direction, but they need better articulation. In addition, Mexico’s strategy requires binding long-term goals and an enabling regulatory framework.
Markets leading the transition to ZEV have often used five policies to accelerate ZEV adoption: 1) phase-out targets, 2) ZEV regulations and COtwo standards, 3) tax incentives, 4) refueling and charging infrastructure, and 5) consumer awareness and fleet purchase requirements.
Through the lens of these policies, opportunities become apparent for Mexico to increase efforts to accelerate the transition to electric vehicles. Here are areas where Mexico needs to step up their game:
- Elimination Targets. Mexico has not yet adopted phase-out targets for internal combustion engines (ICEs) in general. Although Mexico is a signatory to the COP26 declaration on accelerating the transition to 100% zero emission car and van sales by 2040, the declaration is not binding. On the other hand, the latest proposal for the National Electromobility Strategy developed by the Ministry of the Environment (SEMARNAT) takes a position that is inconsistent with the COP26 declaration, setting a goal of only 50% of new sales of light vehicles and electric buses and plug-in hybrids in the same period.
- Regulation. Fuel economy standards for LDV have been in place since 2014 until SEMARNAT will publish a delayed second phase in 2022, but the latest proposal is not an EV strength standard. Contains excessive credits or flexibilities for car manufacturers, which can reduce expected CO2 reductions by 30%.[1]
Without EV strength standards, it would be difficult to increase ZEV LDV’s national sales share from the current 0.33% (Figure 1). The stated goal of producing 50% of the LDV fleet as ZEVs by 2030 will not necessarily boost domestic EV sales. Instead, the status quo could continue: the most efficient and clean vehicles would be produced in Mexico but not sold there. Keep in mind that Mexico is the fourth largest vehicle exporter in the world, with 80% of national production destined for the North American market.
Regarding heavy-duty vehicles (HDV), despite the advances in Latin America, Chile and Brazil have adopted HDV efficiency standards, Mexico shows no signs of following that path.
- tax incentives. A temporary import tax exemption has been granted for electric vehicles until 2024. ZEVs are also exempt from the new vehicle tax (ISAN). Other local incentives for ZEVs, such as those offered in central states such as Mexico City, are exemption from inspection and maintenance programs (verification) and registration taxes (tenure). A more comprehensive framework of fiscal incentives should be adopted at the national and local levels to reduce the cost gap between internal combustion and zero emission technologies until cost parity is reached, to encourage early adoption of zero emission technologies . All of this must occur equitably and fairly.
- Infrastructure. Mexico has around 2,100 EV chargers installed throughout the country. Charging infrastructure must grow at the same rate as electric vehicle offerings; otherwise, consumers may lack the confidence to buy ZEVs. This requires paying attention to the number and location of public, private and warehouse chargers; increased energy production from the grid; a review of electricity rates; and standardization and interoperability of charging networks. Local deployments of electric buses, urban truck fleets, and ride-sharing services are drawing attention to the need for extensive and reliable infrastructure.
- Consumer awareness and fleet purchase requirements. Some local governments are incorporating demand-side policies to advance EV adoption. For example, Mexico City’s BRT system, Metrobus, has committed to fully electrifying one route and is planning to electrify the entire system. Despite this and other deployments of electric models in local bus fleets in cities such as Guadalajara and Monterrey, no mandatory requirements have been enacted.
Colombia adopted the first vehicle purchase mandate in Latin America, establishing by law progressive electric bus purchase requirements starting in 2025 at 10% and reaching 100% of ZEV by 2035. The purchase mandates for bus operators and fleets governments help accelerate the adoption of heavy-duty ZEVs in the short term. Low and zero emission zones are another type of policy that can support fleet transformation; Mexico City has committed to implementing a low emissions zone by 2024.
With policies and goals adopted and proposed in North America to accelerate the deployment of ZEVs, Mexico can move forward and work towards a regional decarbonization economy and even explore new national opportunities such as the manufacture of batteries and other EV components. Domestic and export markets must be transformed.
But the first piece of an effective EV strategy is missing: phase-out targets for all vehicle segments. Mexico needs to send a clear signal of its ambition and pace to transform the transport sector, considering its climate goals and international commitments.
Countries like Chile can be a role model for Mexico. Chile published its National Electromobility Strategy in October 2021, which includes ZEV sales targets for all types of on- and off-road vehicles starting with the elimination of ICE sales of urban buses and light and medium vehicles by 2035. .
It is Mexico’s turn to catch up and join the challenge. More information on ZEV adoption scenarios and recommendations for Mexico under the ZEV Transition Council, of which Mexico is a part, will follow in future blogs.