What role can Argentine industry have in electric mobility?

the transition to electric mobility has accelerated globally in recent years: sales of electric cars have exceeded from just 8,000 units in 2010 to almost 3 million in 2020. However, despite recent expansion, they still represent less than 5% of total sales.

Unlike the growth that has occurred in developed countries, In Latin America, the transition to electromobility is still very early. In 2019, a total of 45,000 units of electric and hybrid vehicles were sold, a figure that is not even 1% of those sold in China. In the region, the best-selling countries in absolute terms are Mexico, with 25,600 units sold, and Brazil, with 12,000. In the case of Argentina, sales barely exceed a few hundred units and the charging infrastructure is almost non-existent.

As the automotive industry is a particularly relevant sector in Argentina in terms of employment and production, the transition to electromobility on a global level is both an opportunity and a threat. The automotive tradition generates assets to take advantage of opportunities to fit into the new global and regional electromobility production chains.

However, the transition also involves significant challenges. First, because it presupposes a radical change in vehicle production technologies, which implies new requirements in terms of technological knowledge and productive capacities and a potential threat for many actors forced to readapt. Second, because it involves a reconfiguration of actors and forms of organization of the sectors.

These two factors increase the levels of uncertainty and the problems of information asymmetry. An example of this is that traditional automotive terminals have a high degree of airtightness and they seem unclear how and when they will make this transition and what their specific needs will be in terms of communicating information to their suppliers.

local integration

Fast forward and start it learning and adaptation process towards the electric vehicle chain will make it possible to prepare the local production system when change is inevitable. This this requires identifying the segments in which there is greater potential for development.

The report “The transition to electromobility” carried out within the framework of the Council for Structural Change of the Ministry of Productive Development points out that in the short term Argentina could have greater potential for the development of the micromobility sector, such as bicycles, skateboards, motorcycles, tricycles, quadricycles and city cars. This is due to the faster electrification curve in this segment due to less technological complexity, lower prices and lower charging infrastructure requirements, as these vehicles do not have need special chargers.

The entry of new players into the electric mobility industry in Argentina, as is the case of Sero Electric, Volt Motors and Coradir, dedicated to townspeople, suggests the existence of opportunities in this segment. These companies currently serve a relatively small market niche in the country and they face various obstacles related to the low scale of production, such as the limited availability of quality local suppliers.

There is an interesting debate on the potential for local production of the various components of these vehicles. Even if the discussion of whether or not to produce lithium batteries locally is omitted, There are other components of powertrain of electric vehicles where there are opportunities.

For example, in relation to cell production, the battery (set of modules composed of several lithium cells) profitable on a small scale, has a relatively simpler manufacture and more customization possibilities, since its design must be adapted to the specificities of each type and model of vehicle. If the fact that the battery of any electric vehicle represents between 30 and 38% of the total cost, this segment becomes a link in the value chain with interesting niche market potential.

However, this lower complexity does not imply that the assembly of the packs does not pose technological and production challenges. Such was the experience of Emotion-22, one spin off in electromobility from the Basso Group, an automotive parts company with a long tradition in manufacturing valves for combustion engine vehicles. Companies that want to follow this path must face the bottlenecks related to the weak capacities of the scientific and technological system to respond with the content and the deadlines required by the customersthe scarcity of testing and certification capabilities available and the weakness of start-up funding institutions, exacerbated when it comes to new technologies.

In complex technologies such as electric vehicles It is important to promote policies that favor product escalation and diversification. Returning to the example of battery packs, research and development activities to improve their performance in terms of charging speed, lifetime, duration and temperature conditions, to give just a few examples, will be crucial for companies entering this sector that they can maintain a position in a larger and more competitive market in the future.

sustainable mobility

The normative and regulatory framework in force in Argentina is mainly oriented towards encourage the import of this technology, without yet proposing a local production strategy or specific promotional tools. In October 2021, the executive branch presented the Bill for the promotion of sustainable mobility included in the package to be discussed by Congress in special sessions.

The project establishes a series of instruments to promote the sector and defines a target for the elimination of polluting technologies associated with transport: from 2041, new combustion engine vehicles can no longer be marketed on national territory. Between 2017 and 2020, at least 15 countries (including 11 in Europe) have set similar ban targets. Most of them have set a deadline of 2030, although some like Spain, France and Canada have set it for 2040. In Latin America, only Costa Rica and Colombia have formally established targets of this type.

Legacy phase-out targets work as a signaling instrument to guide private sector expectations. In this case, these objectives provide a favorable scenario for thinking about policies aimed at the development of a productive sector. Especially in Argentina, where the instability of state officials and structures continually appears as an obstacle to a strategic reflection on development.

However, at least two problems should be mentioned. First, Most of the countries that have established these types of targets did so as a corollary to a previous period of policies promoting electromobility technologies. in which progressive sales quotas for electric vehicles or emission regulation targets for vehicles have been defined. Second, it is necessary to examine the credibility of this signaling. This involves not only the type of productive policies that support the achievement of this goal, but also the existing institutions for its implementation.

In this regard, the bill establishes tax benefits for the demand and supply of electric vehicles and defines quotas for public purchases. But the use of these instruments requires a strategic orientation which makes it possible to identify objectives and critical paths for the policy at the micro level and to articulate actions between different actors.

In which segments and components will Argentina specialize and what strategy will it generate for its international insertion? How will the technological transition be managed compared to players in the traditional automotive industry, which has its own promotional bill? How will the pricing system be regulated and how will the expansion of the corresponding infrastructure be encouraged? How will the science system’s incentive and coordination issues be addressed in order to effectively and in a timely manner respond to market and private sector needs?

For that it is essential to strengthen the institutions that contribute to the design and implementation of development programs for the long-term electric mobility sectorwhich would target the financing needs of strategic public goods and address different areas of work, such as productivity improvement plans, technical assistance to businesses, product development (R&D) services, testing and certification, market research and export trade promotion, among others. Start to think strategically about the institutions of the productive sectors it is a path that Argentina will have to start walking as soon as possible.

* Researcher associated with Fundar’s Productive Development Area

** Researcher from Fundar Productive Development Zone

About Robert Pierson

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