Mexico’s $100-billion auto parts industry is reinventing itself for the EV era

Tecnoformas, a small Mexican company that makes steel pipes used in car auto parts like lubrication, gas tank, and cooling systems, has been rolling with the punches for 28 years. Its founders started the company after they lost their jobs during Mexico’s 1994 economic crisis. Tecnoformas went on to survive the U.S. auto industry’s near collapse of 2008. Most recently, it weathered the Covid-19 pandemic. 

Now, Tecnoformas and many of Mexico’s auto parts suppliers have to contend with Mexico’s transition to electric vehicles. “As our clients move to electric motors, we see a reduction in our production of parts that go into the internal combustion engine,” José Trinidad, a co-founder at Tecnoformas, told Rest of World. “We don’t know what those changes will look like but we have to be ready and with the right attitude to face them.” 

With roughly 3 million cars built annually, Mexico is one of the world’s largest car manufacturers — it ranks seventh, just behind Germany and South Korea. In recent years, Mexico’s zero-emission car production has surged, doubling from 78,000 in 2022 to an estimated 142,000 this year. In March, Tesla announced plans to build a massive new plant in northern Mexico, giving the drive towards electrification an even bigger push.

Meanwhile, Mexico’s biggest export markets are also making the transition to EVs: The European Union banned the sale of new non-electric cars starting in 2035, and the U.S. is aiming for 50% of its new vehicle sales to be electric by 2030. General Motors and Ford’s plants are shifting to EV manufacturing.

For auto parts manufacturers, like Tecnoformas, all this will mean fewer internal combustion engines and the parts associated with them — gas tanks, pumps, pipes, exhaust systems — and more production geared towards electrical motors, involving components like batteries, electrical management systems, and chargers. Mexican suppliers and industry experts told Rest of World they believe the shift to EV is going to be completed sooner rather than later, which has prompted local auto-parts companies to double their efforts to meet the demands of the transition.

Before Tesla announced its new plant, auto parts suppliers in Mexico’s manufacturing hubs, like Querétaro, expected the EV transition to still be a few years off. “Now, they are saying the timeline could shrink,” said Trinidad. Abraham Tijerina Pliego, business development leader at Tecnológico de Monterrey’s School of Engineering and Sciences, told Rest of World the time to act was now, but that “very few [suppliers] are making significant changes to their products or processes to be ready for this new [EV] wave.” 

Mexico is the world’s fourth-largest exporter of auto parts. Thousands of parts manufacturers have emerged in the country to support the massive auto conglomerates that build their cars there — companies like GM, Ford, Kia, Audi, and Hyundai. In 2022, Mexico’s auto parts manufacturing was valued at $106.7 billion; for comparison, Mexico’s completed vehicle exports were estimated at $165 billion in the same year. Auto parts manufacturing employs roughly one million people, with over 12% being directly involved in the production of combustion engines — the jobs most likely to be immediately affected by the EV transition.

All the components that go into internal combustion engines — gas tanks, exhaust valves, transmissions, fuel pumps, and carburetors — will disappear with electrification. Instead, companies will have to pivot to producing parts demanded by the EV industry. 

Tecnoformas, for instance, may eventually have to phase out its current production line. “Those will eventually disappear,” said Trinidad. The company has been on the lookout for the new materials, technologies, and processes that EVs will require. It already supplies Tesla the piping that holds the array of cables connecting to the dashboard. Trinidad is hopeful he’ll see a boost in sales once the Tesla gigafactory is up and running in northern Mexico. That won’t, however, fill the gap left by the lost sales of engine components for Tecnoformas. Trinidad said the effects of electrification will remain an unknown challenge. “We are aware that electric motors are not our expertise,” he said.

Gaining expertise in parts manufacturing for electrical motors will be a challenge, according to German Carmona Paredes, who teaches mechanics and energy at the Engineering School in Mexico’s National Autonomous University (UNAM). He is worried that the local industry will struggle to adapt to the high tech required by EVs. “The biggest challenge for Mexico has to do with batteries, electronics, and electrical motors,” he told Rest of World, noting a large percentage of these components are chiefly made in China and are exported to Mexico just for assembly.

Companies that have already adapted to the new materials and technologies required by EVs are seeing surging demand. Felipe Villarreal is the CEO of Alian, a Mexican company that manufactures plastic components for the auto industry. Alian was recently contracted to provide the casing for the Tesla T3 subwoofer, and is feeling the increased pace of the transition. “We’ve had to increase our capacity to meet the rise in demand,” Villareal told Rest of World. Alian has increased its auto parts production for EVs by 35% in the last three years. 

Aida Mercado Salazar, sales and business developer at IEMSA, a Mexican stamping and plastic-mold injection company, told Rest of World car makers are seeking more aluminum and resins, following the trend of using materials that are lighter, cheaper, and more efficient. “We’ve seen a tendency in the auto part industry of changing the engineering of certain heavy materials for plastic,” Villarreal said, noting that the trend is particularly evident in the EV sector, where the cars can be hundreds of pounds heavier than internal combustion vehicles. The batteries powering an EV can weigh an average of about 1,000 pounds, while the average eight-cylinder engine weighs between 400 and 700 pounds. 

Mercado believes the preference for materials like plastics is not exclusive to the EV sector, but that electrification is certainly becoming an important driving force for demand. “The technology [behind electrification] is all so new that first-generation suppliers like us are acting as guinea pigs,” she said.