They ask for flexibility in the T-MEC for electric cars

Ford Motor Company, General Motors Company and Stellantis asked the United States Trade Representative (USTR) for more flexibility to comply with the rules of origin in the production of electric cars.

The three companies recommended that the USTR work with US automakers to develop a way forward that avoids the current unintended conflict between increasing market share for battery electric vehicles (BEVs) in the United States and compliance with the requirements of the rule of origin of the batteries of the Treaty between Mexico, the United States and Canada (T-MEC).

“Despite investments made by US automakers, if (as projected) BEV market share in the US reaches 10% of new vehicle sales in 2025, there likely won’t be enough BEV batteries that comply with the USMCA,” said the American Automotive Policy Council (AAPC), which represents the interests of Ford, General Motors and Stellantis.

With the expiry of the USMCA battery rule on July 1, 2025 and the end of the Alternative Transition Regime, automakers find themselves in a position where they may need to alter production plans to meet T-MEC. -MEC, limiting production of these new green vehicles after July 1, 2025, apparently until new investments in electric vehicle components can come online to support production in North America.

In essence, there is a tension between the two goals of getting more electric vehicles in the United States and full compliance with the USMCA’s new rule of origin.

Given the lack of flexibility in the USMCA after July 1, 2025, automakers may be forced to produce more internal combustion engine vehicles than anticipated in order to maintain their market share in the United States and fully comply with the T-MEC.

“To address the conflict between increasing electric vehicle market share in the United States and compliance with the USMCA battery rule, we ask the Administration to work with US automakers to craft a path to follow that avoids this conflict and short-term outcome, which is a lose/lose for all parties,” the AAPC said.

The position of the AAPC to the USTR was made as part of the process of a dispute settlement panel under the T-MEC and was set before the Inflation Reduction Law was approved last August, which authorizes 391,000 million dollars in spending on energy and climate change, while allowing US auto credits to be used to purchase cars produced in the United States, Mexico and Canada.

Considering supply chain disruptions related to Covid-19 and others, the auto industry recommended that the USTR maintain or even expand that flexibility for longer periods or for new market entrants.

There is a mismatch between the growing demand for battery electric vehicle components, especially BEV batteries, which account for about a third of the cost of the entire vehicle, and the supply of electric vehicle components, especially BEV batteries made in North America.

This mismatch has become apparent as battery production capacity becomes more apparent, given that there is a three- to five-year window to bring new battery installations online.

Currently, most of the production of high-tech electrification parts and components (battery cells/modules, integrated charging modules, electric drive motors, high-voltage wiring, etc.) is located in Asia.

roberto.morales@eleconomista.mx