EconomyFinancialThe automotive industry warns of commercial retaliation for the...

The automotive industry warns of commercial retaliation for the electrical reform

Francisco Garza, CEO of General Motors in Mexico, poses smiling in one of the photos taken during the meeting between President Andrés Manuel López Obrador and the United States special envoy for climate change, John Kerry.

The executive’s presence at the meeting was no accident. General Motors, the largest vehicle manufacturer in Mexico, has announced an investment of 1,000 million dollars to convert the plant in Ramos Arizpe, Coahuila, and produce electric vehicles. Unlike the millions of gasoline models it has assembled since arriving in Mexico in 1935, which were not tied to emissions targets, the new electric ones that will roll off the production line from 2023 are.

But the electricity reform promoted by President Andrés Manuel López Obrador, as it is proposed, will not allow the company –and in general any of the plants in the sector– to meet the global goals that the corporate has set in reducing emissions. .

Garza has highlighted in the past the importance of Mexico generating conditions that allow investment in renewable energies, but not even the electrical reform, whose draft opinion reached the Chamber of Deputies this week; nor the reform to the Electricity Industry Law (LIE), which seeks to strengthen the Federal Electricity Commission (CFE), and which today could be declared constitutional, point in that direction.

“Unfortunately, if the conditions are not met, Mexico will not be an investment destination, because the conditions that allow us to meet our goal of zero emissions in the long term will not be met,” Garza said in November 2021.

This statement is not exaggerated. Months earlier, the corporation committed to achieving carbon neutrality in its global products and operations by 2040. To achieve this, the US automaker plans to decarbonize its portfolio by transitioning to battery-electric vehicles and other zero-emission vehicle technologies, supplying itself with renewable energy and leveraging credits and carbon bonds.

The American manufacturer is not the only one that has set ambitious emission reduction goals. Nissan, the second largest vehicle manufacturer in Mexico, has also set a goal of achieving carbon neutrality in all of the company’s operations and the life cycle of its products by 2050.

“Nissan will seek further innovations in electrification and manufacturing technology to advance the goal,” the company announced in a statement published in January 2021. In the document, the corporation announced that in the coming years it will focus on developing profitable electric vehicles and more efficient, as well as in achieving greater energy and material efficiency to support the goal of carbon neutrality in the longer term.

This vision has permeated the various Nissan subsidiaries around the world. “We have a plan for 2050 that seeks to reduce our carbon footprint and we are running this plan in the plants, improving processes and emitting less CO2,” said Joan Busquets, vice president of manufacturing for Nissan in Mexico.

Nissan and General Motors produced some 300,000 units in the first quarter of the year, equivalent to 36% of total vehicle production in Mexico. Most of these units were exported to the United States and Europe, two regions that have established ambitious environmental commitments.

US President Joe Biden pledged in April 2021 to achieve carbon neutrality by 2050. The European Union is pursuing a similar goal.

With the two main consumer markets for Mexican-made vehicles moving towards carbon neutrality, government initiatives that seek to cancel all private contracts and eliminate the self-supply figure in order to return to the CFE the lost prominence, have set off the alerts of the sector.

“We are concerned about the impact that (the electrical reform) could have on the automotive industry, especially due to the commitments that the companies themselves have assumed in this transition towards electromobility and in being a zero carbon emitter. This initiative does not pay for the future of the industry,” says Fausto Cuevas, director of the Mexican Association of the Automotive Industry, which represents vehicle manufacturers.

Guillermo Rosales, president of the Mexican Association of Automotive Distributors, emphasizes that for the automotive industry established in Mexico to remain competitive, it is essential to ensure access to clean energy, at competitive prices and sufficient supply.

“It will no longer be enough to have the capacity to produce electric vehicles or electric components or to have free trade agreements to export them without tariffs to Europe or California. By not promoting renewable energy, our exports could be subject to trade reprisals, such as carbon taxes on manufacturing, making Mexico less attractive as an investment destination and affecting job creation,” he said.

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