¡E-Viva Mexico! – Rethinking EV supply chains
The pivot among carmakers to electric vehicles (EVs) is unmistakable and urgent. But keeping up with consumer demand for EVs requires completely rethinking automotive supply chains. Today we travel to Mexico, where it’s all coming together.
A seamless shift?
Some of the world’s biggest carmakers have set the bar high on electric vehicles. Lofty goals and ambitious timelines have come one after the other in recent years: BMW and Ford want EVs to make up half of all car sales by 2030; General Motors plans to shift completely to EVs in 2035; Volkswagen hopes to make its last gas-powered car in 2026.
The biggest question is not whether consumers will be willing to give up their gas-guzzlers, but how carmakers will seamlessly shift to EV production. After all, the auto industry is over a century old, and until recently, automakers designed production lines and supply chains to manufacture variations of a single product: cars with combustion engines. Rolling EVs off the line requires a lot more than swapping gas tanks for batteries. Instead, we’re seeing a fundamental shift in how cars are designed, sourced, produced, and delivered.
It's a whole new automotive supply chain – and a complicated one at that. Geopolitical uncertainty, fluctuations in global trade, and a litany of EV battery safety and compliance regulations only add complexity. That’s why anyone invested in the success of EVs welcomes stability and consistency, and they’re finding it in Mexico.
Supercharged investments in Mexico’s automotive sector
Ever since Henry Ford opened Mexico’s first auto production facility in 1925, the country has been essential for many manufacturers, especially those exporting to the United States. Close to 100 years later, Mexico is poised to reinforce its foothold as a key production hub as automakers rapidly shift toward EV production.
This can partially be attributed to political and economic developments, such as investments by the United States in EV infrastructure and a global business trend toward bringing production physically closer to key consumer markets.
But the biggest factor has been investments announced by the car manufacturers themselves:
EV investments in Mexico
For BMW’s battery assembly center and other EV facilities in Mexico
For a dedicated EV production plant for Chinese carmaker Jetour
For Tesla’s EV ‘gigafactory’ near Monterrey
Ford Mach-E electric SUVs planned for 2023 (3x more than 2021)
Reimagining the automotive supply chain is like reinventing the wheel
These investments also demonstrate how committed automakers are to the significant adjustments they’ll need to build EV supply chains. But while it took decades to develop the gas-powered vehicle supply chain into the well-oiled machine it is today, the industry will need to come up with solutions for EVs much quicker given the demands and expectations.
That is easier said than done. EV and traditional car production are worlds apart. For example, the power source of combustion engines isn’t part of a car’s supply chain. Fuel isn’t put into a vehicle until it is ready to drive. EV batteries must be integrated into the production process from the start. That includes sourcing raw materials such as nickel, cobalt, graphite, or lithium from places like Bolivia or Congo – unfamiliar territory for car manufacturers. Assembled EV batteries are designated as hazardous goods and regulations for shipping such volatile materials vary widely according to national and local laws.
Beyond the batteries, EVs also have electric drive trains, advanced connectivity components, and complex charging processes. Each of these requires a completely reimagined supply chain, often with suppliers who are relatively new to the auto-mobility sector and therefore unfamiliar with production schedules, lead times, and other variables.
With demand for EVs on the rise and sales expected to grow exponentially, you might call it a race against time. Who can quickly develop the EV supply chain expertise to handle the added layers of complexity, meet customer needs and compete in the marketplace?
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Source: Frost & Sullivan
Building the EV supply chains of the future
The race is certainly on in Mexico, and after years of experience working closely with automakers here, we’re leveraging our expertise to build specialized infrastructure around EV logistics. We recently opened a new EV Center of Excellence in Mexico City – a first in the Americas region – to store and distribute electric batteries for the auto-mobility sector. The supply chain facility features EV battery warehousing and transport alongside compliant and cost-efficient solutions from component sourcing to vehicle delivery. The center is also home to specialist teams trained to move hazardous goods like EV batteries. The goal is to provide the auto-mobility industryEV carmakers with much needed synergies in the region.
For automakers with a footprint in Mexico, expanding it to include EV production provides peace of mind. It also allows them to continue their shift toward omni-sourcing, a lesson learned from the pandemic and a strategy that sees key components sourced from more than one place to hedge against supply chain disruptions.
Mexico’s time to shine
Not all car manufacturers have announced such bold plans to shift toward EVs in the coming years, but the writing is on the wall: Electric vehicles are poised to dominate the road in the next decade. Automotive supply chains and production facilities will need to evolve accordingly.
And time is of the essence. Governments, businesses, and consumers are eager to see changes that will make the transport sector more sustainable.
Is it Mexico’s time to shine? It sure seems that way. The ability of automakers to deliver on their promises of an EV future will depend in large part on supercharging the supply chains in, out and within this century-old automotive powerhouse.
Published: September 2023