Electric cars, Latin America, and the Great Power Competition

Electric cars, Latin America, and the Great Power Competition

José Carlos Díaz Silva[1] , OBELA[2]

In 2024, it became clear that the West had lost the competition in electromobility to the East. American flagship companies such as Ford or GM are lagging in producing electric cars (EVs). Tesla, which until 2022 was the leading supplier of pure EVs, has been overtaken by Chinese manufacturer BYD since 2023 while facing difficulties in its sales, profit margins and supply chain intertwined with Asia. On the other side of the Atlantic, Germany's Volkswagen also showed that it could not compete with Asian companies by announcing the closure of two factories in its territory (an unprecedented move), which Chinese companies could take over. In Asia, Japanese companies can compete, especially Toyota, which leads in the production of hybrid EVs. Nissan and Honda announced plans to merge, in December 2024, and take on the Red Dragon cars. Although the deal with Nissan did not go through, the company is continuing with its restructuring plans. In this article, we will review what this means for Latin America as it transitions towards electromobility in the context of the trade war launched by Washington. 

Although the transition to electromobility is slow and met with resistance from oil-rich countries like the US, EV procurement has increased globally, with China leading the way. As shown in Graph 1, despite slow growth, just over 1.92 million new EVs were sold in December 2024. In total, January to December totalled more than 17 million units, which outnumbers US vehicle sales of 14 million. Chinese brands dominate. From January to September, the leader was BYD, which sold 2.6 million units, twice as many as Tesla (1.3 million); far behind in sixth place was Volkswagen, which sold 0.32 million EVs. 

In Latin America, 2024 was the most substantial growth year, driven by Mexico and Brazil, the most prominent car markets. In the former, 124,000 EVs were purchased (8.3% of the total number of cars sold), of which 40,000 were BYD. The Asian company plans to double its sales by 2025 and ratify its interest in manufacturing in Mexico, which means that penetration in Aztec territory will continue despite Trump's protectionism. President Sheinbaum announced that a mini-Mexican electric EV will be produced through its public universities (such as the IPN and TecNM). She announced that the plant will be located in Puebla (in the centre), in the municipality of José Chiapa (where Audi has a factory), and would begin operations in 2030, with a production capacity of 100,000 to 150,000 EVs per year. 

In the Carioca country, the environment is even more favourable to China. From 2023 to 2024, sales grew 90%, from 93,000 to 177,000. BYD also dominates the market, with a 70% share, followed by the Chinese Great Wall Motors and Geely. This results from the industrial policy and the significant investments made in Brazil, which already has an entire production chain for EVs and electric buses, with BYD extracting lithium, refining it, producing batteries and assembling vehicles. All indications are that there is already little room for Western brands. Despite the company's recent scandals over the use of slave labour in the construction of one of its factories in Camaçari, its operation in the Amazonian nation will continue and expand. As an oxymoron, the plant will be one of the most modern in the region, producing more than 150,000 EVs per year. 

In a strategic move, Nissan, Honda in December 2024 their intention to merge, aiming to strengthen their position in the global electromobility market and compete with Chinese companies. By February 2025, though, the negotiations were cancelled. In global terms, the agreement would have made them the third largest producer, behind only Toyota and Volkswagen, which shows their potential. While these companies currently have a significant presence in Mexico, where Nissan is the leading supplier of conventional cars, their focus on the transition to electromobility suggests that they are eyeing the potential of Latin America's second-largest market. This move underscores the potential for Western brands to regain their foothold in the rapidly evolving EV market. 

In sum, Asian brands have positioned themselves as the most important. Chinese companies have already established themselves in Brazil and Mexico. There is already capacity for domestic production and exports; in the latter, there are investment plans for companies such as BYD, in addition to the potential represented by the Japanese plants, such as Nissan, which dominate the conventional market. Volkswagen is going through a crisis; although it announced in 2024 that it would invest in Mexico and Brazil, it has not been able to offer cheaper cars than its Asian competitors. Thus, the data suggests that the trade war cannot stop the penetration of Asian EVs and that the West has lost the automotive market in LA.