The 25% tariffs on vehicle imports to the U.S. remain in place. This leaves the automotive industry with significant business costs and complex and costly investment decisions.
As most automakers have committed to transitioning to highly electrified powertrains, they have faced several well-known challenges in the industry: supply chain development, high production costs, lack of available charging infrastructure, range range of battery electric vehicles (BEVs), and exorbitant finished vehicle prices. This has meant that the adoption of electric vehicles has not grown in accordance with the expectations and objectives of the vast majority of automakers: according to data from S&P Global Mobility, in 2024, battery electric vehicle (BEV) registrations represented 7.8% of the total U.S. market, while Canada accounted for 6.4%. In Mexico, BEV sales represented 1.62% of the total market, according to official information from INEGI.
In addition to the specific challenges of electric vehicles, the automotive sector today faces another major challenge stemming from the ongoing trade tariff war; announcements, final implementation rules, as well as dates of official imposition, have varied depending on agreements and negotiations with countries such as Mexico. Recent updates of tariff measures on components, in compliance with the T-MEC, slightly alleviate the situation. However, the 25% tariffs on vehicle imports to the U.S. remain in place, and this still leaves the automotive industry with significant trade costs and complex and costly capital investment decisions to be made in the short term.
As a brief recap, vehicle production in North America began to feel the effect of the global COVID-19 pandemic in the early 2020s: from extensive inspections and sanitization of components imported from other countries, to production shutdowns due to global confinement that brought the regional industry to levels approaching those of the 2008 economic crisis. Semiconductor shortages further aggravated the sector in 2021 and 2022. Finally, just as the automotive industry was seeing the light at the end of the tunnel, outbound logistics of finished vehicles became a major challenge for automakers with operations in Mexico during 2023.
Despite these obstacles, the automotive industry has emerged more resilient and flexible, finding new and robust ways to manage its operations across the entire vehicle production value chain.
Looking ahead, if the extremely volatile environment continues for an extended period of time, we could witness a complete reset in the current configuration of regional automotive operations as we know them. With an uncertain future ahead, making calculated decisions to maximize flexibility will be more crucial than ever.