Breathe
By Barbara Anderson
Did you know that in 1900 about 30% of the cars on the road in the United States were electric? Today they are only 1%. The reason? Henry Ford, the massification of his 'Model T' and the discovery of rich oil deposits in Texas. Abundant and cheap gasoline boosted the sale of combustion vehicles from the United States to the entire planet.
Interestingly, it is this same percentage of 30% of its electric vehicle fleet that the same country aims to reach by 2030.
We are at a time -again disruptive- which is the transition towards electromobility where, once again, the world's largest market is marking a path that in a certain way has us intrinsically involved. The U.S. government announced that in seven years they will promote the purchase of electric vehicles until they make up 50% of all vehicle purchases.
Last week, the Directorate of Global Economic Impulse of the Undersecretary for Multilateral Affairs and Human Rights of the Ministry of Foreign Affairs presented a document of almost 200 pages ("Working Group for the Electrification of Transportation Mexico - United States"), an exhaustive report they produced in alliance with the University of California (UCLA) to put into context the challenges involved in the global drive towards the electrification of all vehicles, the opportunity it represents for our country (main automotive supplier to the United States and the fourth largest exporter on the planet) and all the gears that must be set in motion, oiled, added and expanded to be an engine -electric- of a market valued by the International Energy Agency at $190 billion dollars by 2030.
The Mexican side was joined by seven other universities, 15 automotive terminals, the CFE and the Mexican Association of Secretaries of Economic Development.
On the U.S. side, the State Department, the Department of Transportation and the Department of Energy were part of this work.
The automotive sector is important to our economy: it represents 3% of the total national GDP and 16% of the manufacturing GDP. We are already the seventh largest vehicle manufacturer in the world and last year alone we received almost $5.4 billion dollars in Foreign Direct Investment (FDI) for this sector.
The tensions between the United States and China, the microprocessor crisis and the logistical difficulties of long distances exposed by the pandemic are factors that are playing in our favor. Let alone the trite plus of 'nearshoring'.
But it 's not all plain sailing because Mexico also has a number of 'areas of opportunity' (to use the slang of human resources managers) that must be addressed and improved in order not to miss out on a business that is moving at an accelerated pace.
Where do we falter?
In the SRE and UCLA (University of California) report, they summarize what must be promoted so that the much-vaunted transition to electromobility can effectively take us by surprise:
1) innovation and development in the electric automotive sector, 2) innovation in circular economies of recycling and battery disposal, and 3) innovation and specialized human resources.
On the production side, Mexico has proven to be one of the countries with the highest labor productivity rate (which becomes very labor intensive in the final phase of manufacturing combustion vehicles). But in the manufacture of electric units, with fewer parts, less labor is required 'on the unit' and more in robotic control panels. This is the famous industrialization 4.0 (or Fourth Industrial Revolution) where automation and data exchange are what is most required.
"The production of electric vehicles requires further digitization of the entire production chain. This drives digitalization and the implementation of the 5G network," the report reads.
The entire chain involved in the automotive sector, from Tier 3 (suppliers of raw materials), Tier 2 (auto parts), Tier 1 (components) to the assemblers, emphasized the need to "change the size" of the infrastructure. It is impossible to think of a reconversion only from the companies' side.
Among the requests made by the protagonists and analysts of the sector, there is a central (and even contradictory with the current administration) request to hold legislative forums to promote a General Law on Science, Technology and Innovation and other necessary reforms for the promotion of innovation in Mexico.
The other demands were for labor inclusion, modernization of customs processes, training of employees in the sector in programs including binational programs with the United States and (another controversial issue for the 4T) how to work on the reconversion of the generation of greater volumes of clean energy to feed the increase in industrial consumption and the network of electric charging stations (recharging units), since it is expected that 3% of the energy consumption of the entire country will be absorbed by the vehicle fleet itself.
An invisible (and overpriced) input
But this new automotive sector also requires an invisible input: the 5G network. "In this new mobility ecosystem, the development of autonomous vehicles and interconnected services depends on digital networks. The 5G network will make it possible to connect a hundred times more devices, which will be able to enable the massive internet of things, which means a million connected objects per square kilometer," specifies the SRE report.
As the electric vehicle becomes "smarter", the interrelationship between these two industries (automotive and telecommunications) will be even greater, both for manufacturers and users. "In this regard, two barriers to 5G network adoption were identified through the interim interviews with telecom experts: infrastructure deployment and spectrum cost," the paper adds.
For the first point, since 5G systems require a greater number of antennas (which should increase geometrically in a few years), it is important to coordinate the different levels of government, especially in the municipalities, to speed up the installation and deployment in the country. Today it is an odyssey community by community to install receiving stations. And this also includes government investment in rural areas that continue to be neglected by both private telecommunications companies and the recent parastatal Red Compartida. And the second request from the automotive industry is to reduce the cost of spectrum. Today, this invisible input that makes telecommunications possible is the most expensive in all of Latin America and almost twice as expensive as in countries such as Germany and the United States.
The cost of the spectrum will depend on a negotiation with the Ministry of Finance and Public Credit (which determines the value of the spectrum), which will no longer only have to be led by companies that traditionally file complaints from the telecommunications sector, from América Móvil to AT&T Mexico, but now from the Ministry of Economy and the Ministry of Foreign Affairs, in addition to the powerful automotive terminals present in the country and those yet to come.
"The Treasury should understand that the more the spectrum is used, the more revenue will increase and growth will be generated", an executive of a European telephone company told me some time ago. In addition to this constant and sound value, we must add the extra incentive that a lower cost will generate to attract FDI, no longer to fight for mobile telephony clients, but for the billions of dollars that this new transformation of the automotive industry will mean, as disruptive as the one that Henry Ford started with his Model T 120 years ago.
The opinions expressed are the responsibility of the authors and are absolutely independent of the position and editorial line of Opinion 51.
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