Electrifying investment

Latin America is experiencing a boom in electric vehicle production – infrastructure will have to keep up.

Great Wall Motor (“GWM”), one of China’s largest automobile manufacturers, is to invest USD 1.9bn in Brazil over the next decade to produce electric and hybrid cars (“EVs”). The size of the investment reflects increasing confidence – and excitement – in the region’s growing market for EVs.

A Brazil-based automotive expert provided some context, “Across Latin America, the electric vehicle market remains small in comparison to Europe and North America – in 2020, there were 10,766, supported by a network of 1,292 public charging stations. However, this number looks set to rise exponentially as governments across the region support a transition to greener modes of transport and renewable energy generation targets.”

“Across Latin America, the electric vehicle market remains small in comparison to Europe and North America.”

Automotive expert, Brazil

GWM will open its largest operation outside China at a factory in São Paulo state. GWM is sensing opportunities across the region given their announcement that the facility will serve as an export hub for Latin America. The investment is a boon for Brazil, the development opens the door for investments focused on the development of EVs in the public transport and goods sector with significant opportunities for new green technologies. This could be applied to a broad range of transport options including trains and even boats.

Politically, this is exactly the kind of investment that Brasília likes to tout. GWM’s investment is expected to boost Brazil’s automotive sector – one of the world’s largest – which has suffered closures and job losses as Covid slowed economic growth. In a sign of how serious things became, Ford left the country last year following decades of manufacturing – unions sharpened their criticism of the government for failing to support the industry.

Asian capital dominates Latin America’s EVs investment landscape. Chery, another Chinese car manufacturer, announced last week that it will produce around 50,000 units a year of its flagship small city EV. Already across the region, Chery currently sells several of its gasoline vehicles – including the top-selling Tiggo7. With an established footprint, the company is capitalising on the move towards green vehicle alternatives.

In Argentina, the government has encouraged EV manufacturing. Three models are fully manufactured in the country: Sero Electric by Movi Electric; Tito by Coradir; and Volt by Volt Motors.

Unsurprisingly, sound regulatory frameworks are critical for creating markets attractive for EV investment. The industry expert highlighted that, “In Colombia, the government implemented a regulatory framework in 2018 after consultation with regulatory bodies in Europe and North America. The framework promotes the use of EVs and incentivises the development of EV infrastructure by functioning in tandem with legislation that reduces taxes and eliminates restrictions on transit through cities and other urbanised areas.”

“The [Colombian] framework promotes the use of EVs and incentivises the development of EV infrastructure by functioning in tandem with legislation that reduces taxes and eliminates restrictions on transit through cities.”

Automotive industry expert, Brazil

Bogotá plans to have 600,000 electric vehicles on Colombian roads by 2030. Further south, Chile’s ‘National Electromobility Strategy’ aims to electrify 40% of the private fleet by 2050 – the incoming administration of Gabriel Boric may push for even more ambitious targets as he seeks to reduce car-fuelled CO2 emissions by millions of tons per year.

Latin American governments should be given credit for moving swiftly to incentivise the rollout of EVs. Across the region, governments in Argentina, Brazil, Colombia, Costa Rica, Ecuador, Mexico, Paraguay, the Dominican Republic and Uruguay have either exempted entirely or significantly reduced EV import tax and others are planning to follow suit.

EVs are a win-win for the region and for governments looking to boost their green credentials. Latin America already generates almost 60% of its electricity from renewable sources – no other continent produces so much.

By 2050, there are expected to be more than 200 million cars across the continent. With such demand, this is a rare opportunity for Latin America to demonstrate how to encourage drivers to transition, cleanly, affordably and with public and private sector support.

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