US border states grow enticing as EV cluster forms in Southwest

Peng Chen, DIGITIMES Asia, Taipei 0

Ethan Chen is a representative for New Mexico Economic Development Taipei Office. Credit: DIGITIMES

US states like Arizona and New Mexico are expected to become more tempting for investments, partly thanks to an EV cluster that will emerge in the southwestern US and northern Mexico. The border states will also play a crucial role in achieving the US goal of raising local production rate.

The US automotive industry has been fostering its EV venture with incentives offered by the Inflation Reduction Act (IRA) and other policies. In addition, the United States-Mexico-Canada Agreement (USMCA) requires that 75% of vehicle content be built or sourced in North America.

At the US Automotive Business Opportunities Seminar on April 17, a 2024 E-Mobility Taiwan event, Ethan Chen, a representative for the State of New Mexico Economic Development Taipei Office, said that Mexico is the world's fourth largest automobile exporter. About 95% of automotive tier-1 suppliers have set up production sites in the country's north. Leading Taiwan-based electronics manufacturers like Winstron, Inventec, Pegatron, and Foxconn have all expanded to Juarez, Mexico, producing EV components, Chen added.

New Mexico is just across a bridge from Mexico. Chen said several Taiwanese companies will invest in the state, including Hota Industrial MFG's notable US$99 million project. Hota, a Tesla supplier that manufactures powertrain components, announced in 2023 that it will build its first plant outside Asia in the US.

Chen said carmakers, suppliers, and semiconductor companies in US border states like New Mexico, Arizona, and Texas, and in Mexico are expected to form an EV cluster in the area. Access to resources will help companies shorten their supply chains and be more resilient.

The US government has strived to bring manufacturing back to its home turf as tensions with China, a global production powerhouse, persist. The Biden administration also plans to tighten the "Made in USA" rules to require 75% of domestic content.

Steve Hsu, executive director for the Arizona-Taiwan Trade and Investment Office, said on Wednesday that Canada and Mexico will be critical to the US ambition of rebuilding supply chains and industry ecosystems. Since the US bears higher production costs, Mexico will be the appropriate candidate for low-end production and basic processing.

He also said enterprises tend to put part of their production in Mexico to utilize cheaper supplies and labor forces, assembling their products in America to meet the "Made in USA" requirements. The strategy will make industrial groupings on the US-Mexico borders more important.

According to Hsu, Arizona has one of the top seven EV registrations in the US. The state has welcomed several investments in the sector, including American Battery Factory building its US$1.2 billion LFP battery factory there. South Korea-based LG Energy Solution has also planned a US$5.6 billion battery project in the border state.