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Electronic vehicles offer opportunity for U.S. and auto manufacturers

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Commentary:

One of the hottest global markets is the production of electric vehicles (EVs). According to Car and Driver magazine, registration of electronic vehicles in the U.S. shot up 60 percent in the first quarter of 2022. This occurred as the registration of overall new car registrations declined by approximately 18 percent. Approximately one percent of the roughly 250 million vehicles on American roads are EVs. Data service provider HIS Markit, which merged with S&P Global this year, is predicting that between 25 and 30 percent of new vehicle sales will be electric by the end of the decade. Globally, EV sales grew 43 percent in 2019 and 46 percent in 2020. In 2021, EV sales more than doubled. In this same year, more EVs were sold in any given week than were sold 10 years ago in the entire year.

We all know the allure of EVs. They are perceived as a major way that we can cut carbon emissions around the globe. EV technology has drastically improved during the past decade and EVs are more efficient and easier to manage. Their driving range per single charge also has increased, and every day more and more charging stations are added to the grid. EV companies are also touting the power of their vehicles, as compared to traditional gas combustion models.

Some countries have embraced EVs as their major contribution to addressing global warming While EV sales account for 4.6 percent in the U.S., in Norway, they accounted for 86 percent of the automotive market through March 2022.

However, the U.S. is taking measures to promote the increased production and use of EVs within its borders. In May, the Biden Administration announced that $3.1 billion in funding will be allocated to encourage efforts to manufacture electric vehicle batteries and their associated parts within the U.S. The U.S. Department of Energy also is allocating $60 million for the recycling of used EV batteries. Consumers who buy an EV that contains a North American-built battery with more than 40 percent of the metals produced or recycled on the continent can be eligible for a tax credit of up to $7,500.

And on August 31, Toyota announced that between 2024 and 2026 it will invest $5.6 billion in EV battery plants in the U.S. and Japan. Approximately, $2.5 billion of this total will be invested in the company’s battery manufacturing plant in North Carolina. According to a Toyota press release, the investment will add production capacity and increase the workforce in this plant by 350 employees for a total of 2,100. In 2021, Toyota announced a global investment of $70 billion in its EV efforts. Other major automakers, such as General Motors, Ford, and Hyundai, also have announced new investments in their EV markets.

While all of these announcements have been occurring, Mexican President Andres Manuel Lopez Obrador appointed Sonora Governor Alfonso Durazo as the head of LitioMx, the newly created, state-managed company in charge of lithium exploration and development. LitioMx will be headquartered in Sonora, and President Lopez Obrador stated that Sonora will become the overall leader in Mexico’s effort to produce more lithium. The Mexican president is currently evaluating new joint ventures with private companies in the development of mining projects involving lithium in Sonora.

Mexico’s lithium efforts provide a great opportunity for the U.S. to partner with our neighbor to the south to formulate strategies for EV battery production in North America. If Sonora and other regions in Mexico prove to be ripe in the quest to establish new lithium production, the U.S. will have a source of lithium on its southern border. Production sharing between the U.S. and Mexico has occurred for years in the manufacturing of automobiles. For decades, firms from the U.S., Mexico, and Canada have all cooperated to supply components, labor, and technology to produce state-of-the-art vehicles. This production sharing has allowed North America to compete against the world effectively and efficiently in the automotive industry.

Even though Mexico’s lithium strategy presents an opportunity for U.S. EV manufacturers, nothing should be taken for granted. China has aggressively invested in diverse projects in many developing countries with the objective of gaining a foothold in markets, to have access to precious resources, and/or to extend its sphere of influence throughout the world. U.S. EV battery and auto manufacturers must quickly move to collaborate with the Mexican government to form strategic partnerships that will benefit both countries. If the U.S. hesitates or allows a void to occur, it is likely that China will fill this void.

Jerry Pacheco is President of the Border Industrial Association and Executive Director of the International Business Accelerator.