Is There Anyone Who Can Compete With China In The Electric Vehicle (EV) Market?

There are notable investment opportunities in the EV industry emerging from Mexico and South Africa, which are becoming prominent players in the market.

April 28, 2023
4:29 PM

Tesla's new Megapack battery factory in Shanghai has sparked discussion about which country will dominate the future of electric vehicle (EV) production. China has been a leading EV giant for the past decade, with around 300 commercially available EV models and four of the world's 10 largest battery manufacturers. However, other countries are emerging as potential major players in the EV industry, such as Mexico and South Africa. Mexico has significant potential in the North and Latin American markets, while South Africa has a strong automaking industry and trade links with Africa and Europe. While China will likely continue to dominate global EV production, other countries may offer production hubs to decrease dependency on China.

Tesla’s announcement of a new Megapack battery factory in Shanghai has led to speculation about which country or region will dominate electric vehicle (EV) production in the future. China has been a rising EV giant over the past decade, with around 300 commercially available EV models and four of the world’s 10 largest battery manufacturers. EV sales in China have increased from 1.3 million to 6.8 million in the past two years, compared to 800,000 in the U.S. However, other countries are beginning to develop their EV potential, offering investment opportunities and creating competition in a market overwhelmingly dominated by China.

Mexico, for example, is showing significant potential in the North and Latin American markets, with several well-known car makers such as Ford, GM, Audi, and BMW investing in EV assembly facilities. Tesla has also announced a $5 billion Gigafactory in the north of the country.

Thanks to the USMCA free trade agreement with the U.S. and Canada, around 80 percent of the components required for EV manufacturing are made domestically in Mexico, reducing reliance on international supply chains. EV production in Mexico is expected to reach 142,000 cars this year, compared to 78,000 in 2022. While Mexico’s EV sales market is small at present, it is expected to grow rapidly over the next decade, with sales predicted to reach 72,655 EVs nationally by 2030, up 2,000 percent from today.

South Africa is another country that is emerging as a potential major player in the EV industry. Revenue from South Africa’s EV market is expected to reach $27.68 million in 2023 and grow at a CAGR of almost 30 percent between 2023 and 2027 to reach $79 million. The country’s automotive sector contributed around 4.9 percent of South Africa’s GDP and 27.6 percent of manufacturing output in 2020, with 2019 revenues totaling $35.6 billion. The National Association of Automobile Manufacturers of South Africa has identified EVs as having major export potential, but the South African government has not yet established subsidies or incentives to encourage EV manufacturing, which could deter companies from investing in the industry.

If the government creates policies to support market growth, South Africa could become a major EV production hub thanks to its well-established trade links with Africa and Europe, as well as its strong automaking industry.

While China will likely continue to dominate global EV production, other countries are gradually developing their EV manufacturing potential, and this could provide production hubs in other parts of the world to decrease dependency on China for the future of transportation.

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