Mexico lithium production an opportunity for the U.S.

According to Car and Driver magazine, registration of electronic vehicles in the U.S. shot up 60% in the first quarter of 2022. This happened at a time when new car registrations overall declined by 18%. About 1% of the roughly 250 million vehicles on American roads are EVs, and between 25% and 30% of new vehicle sales are expected to be electric by the end of the decade.

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 has increased, and every day more and more charging stations are added to the grid. 

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

However, the U.S. is taking measures to promote the increased production and use of EVs. 

In May, the Biden administration announced that $3.1 billion in funding will be allocated to encourage the manufacture of electric vehicle batteries and their associated parts within the U.S. The Energy Department is allocating $60 million for the recycling of used EV batteries. And consumers who buy an EV that contains a battery built in North America with more than 40% of the metals produced or recycled on the continent can be eligible for a tax credit of up to $7,500.  

On Aug. 31, Toyota announced that it will invest $5.6 billion in EV battery plants in the U.S. and Japan between 2024 and 2026, including about $2.5 billion in its plant in North Carolina. According to a Toyota press release, the investment will add production capacity to the plant and increase the workforce 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, including General Motors, Ford and Hyundai, also have announced new investments in EVs. 

In the meantime, Mexican President Andrés Manuel López Obrador has appointed Sonora Gov. Alfonso Durazo as the head of LitioMx, the new state-managed company in charge of lithium exploration and development. LitioMx will be headquartered in Sonora, and AMLO stated that Sonora will become the overall leader in Mexico’s effort to produce more lithium. The Mexican president is also evaluating possible joint ventures with private companies to mine 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 for new lithium production, the U.S. will have a source of lithium on its southern border. 

Production sharing between the U.S. and Mexico in the manufacture of automobiles has occurred 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 to gain a foothold in markets, access precious resources and extend its sphere of influence. 

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 it.

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Jerry Pacheco is executive director of the International Business Accelerator, a trade counseling and training program of the New Mexico Small Business Development Centers Network. He can be reached at jerry@nmiba.com.