The global surge in electric vehicle (EV) demand presents challenges and opportunities for vehicle manufacturers, especially in scaling production to meet demand amid evolving trade policies and international EV adoption targets. This study utilizes the Model for International EV Trade (MONET), a tool designed to support automotive trade policy and industrial planning by linking global light-duty vehicle (LDV) demand with production. By using MONET to analyze North American LDV trade flows, with a focus on Mexico's role as a key supplier, this study reveals critical insights into how its automotive industry might respond to rising EV demand and regional nearshoring policies. Findings indicate that while Mexico currently supplies 15% of the US LDV market, its EV output accounts for only 6%. To maintain its market share, Mexico will need to shift up to 50% of its production towards EVs by 2035. While further integration with North America could boost demand for Mexican-produced EVs, expansion into Latin America could drive additional vehicle sales growth while reducing relative battery size per vehicle. These insights highlight the broader impacts of the EV transition for economies with a strong dependance on their automotive industry and demonstrate the value of MONET in developing strategies that strengthen regional supply chains, support efficient EV deployment, and reduce material intensity. Although focused on North America, this study provides insights relevant to policymakers and industry leaders worldwide.
Read full abstract