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Snubbed by Tesla, Mexican government pledges to create its own small, affordable electric car

[October 12, 2024] MEXICO CITY (AP) — Snubbed by Tesla, Mexico’s new president pledged Friday to create a Mexican-made small, affordable electric car to compete with vehicles imported from China.

President Claudia Sheinbaum said Teslas were too “onerous,” or expensive, for the Mexican market anyway. Tesla’s cheapest car, the Model 3, costs about $30,000.

Tesla CEO Elon Musk said in July the company had “paused” plans for a plant in Mexico, citing Donald Trump’s remarks about possible auto tariffs.

Sheinbaum said her government will try to bring together Mexican companies and researchers to produce a “compact, cheap electric car.”

“The idea is to use Mexican companies and Mexican researchers' ingenuity, to bring them together to assemble this electric car,” Sheinbaum said. “The idea is to create production chains so that this entire electric car is made in our country.”

She cited electric vehicles from China and India — some of which are already flooding into Mexico — as examples. Small electric motorbikes from China have flooded Mexican streets in recent months, but Sheinbaum said motorbikes, which in Mexico are often ridden by three people at a time, were too dangerous.

The plan faces a number of problems, including the fact that Mexico doesn’t produce any lithium, the key ingredient for batteries, nor any mass quantity of batteries. High domestic electricity rates could also be a roadblock.

There are some clay-encased lithium deposits in northern Mexico, which the government nationalized under the last administration. However, Sheinbaum said the techniques for mining that lithium weren't currently commercially viable, and that production from those sources was “a little bit more long term."

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And anybody seeking to charge a battery at home could face punishingly high bills. Mexico subsidizes low-level domestic power consumption at about 10 cents per kilowatt hour, a bit lower than the U.S. average.

But a vastly higher rate kicks in for any electricity consumption above the minimal level, which is basically just enough to power a dozen light bulbs, a washing machine and a refrigerator.

Moreover, Mexico's decrepit power lines and transmission facilities are barely able to keep up with current demand, let alone widespread at-home charging of vehicle batteries.

Sheinbaum did not say what sales price Mexico was aiming at for its ultra-small electrical car, but that could be another problem.

Some Mexican discount stores are offering a tiny mail-order Chinese electric car for about $1,000. It would be very hard for Mexican manufacturers to compete with that motorcycle-level price.

Mexico was stung after Tesla postponed plans to build a Gigafactory in the northern border state of Nuevo Leon earlier this year. The promise of the plant had sparked stiff competition among Mexican governors to get the facility.

Musk said in July “I think we need to see just where things stand after the election. Trump has said that he will put heavy tariffs on vehicles produced in Mexico. So it doesn’t make sense to invest a lot in Mexico if that is going to be the case.”

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