Why Are Tesla Cars Not Selling in Mexico?
By: Roberto Valdes Sanchez Navarro
Tags: Tesla, Electric Vehicles, Technology, Automation, Elon Musk

Roberto Valdes Sanchez Navarro

“Believe you can and you’re halfway there. “ — Theodore Roosevelt

Obstacles

Price Point:

Currently, the cheapest car in the Mexican Automobile Industry is the Renault Kwid with a starting price of $ 164,900.00 MXN ($ 7,690.52 USD), making it 84.29% cheaper than a Tesla Model 3 which has a starting price of $ 1,049,900.00 MXN ($ 48,964.71 USD). The Nissan Sentra and March are within the top 10 best-selling cars in Mexico. A consumer can purchase insurance for these cars for a cost close to $ 9,000.00 MXN ($ 420.00 USD) a year, whereas Tesla insurance is about 47% more expensive at $ 17,000 MXN ($ 793.33 USD) a year.

Low insurance Penetration:

Given the starting price of the lowest Tesla model, low insurance penetration also affects adoption.

Mexicans do not follow a culture of prevention, data shows. They prefer to pay for the consequences, rather than paying to prevent. Seven out of 10 Mexican cars do not have insurance according to CONDUSEF; 42% consider it awfully expensive, while 20% do not know where to purchase it.

Lack of financing:

When Tesla taps into the European automobile industry, it finds it financially mature, specifically on car leasing schemes. This with other financial services, amplified the opportunity of owning a Tesla in Europe. On the other hand, Mexico is still at the early stages of developing a leasing market, and most Mexicans see leasing schemes, debt, and financing as the opposite of something beneficial. Because of the exploitation of financial rates in the country, and the lack of a mature financial culture, most Mexicans are fearful of leasing cars.

Marketing:

Tesla falls into the category in which it can be compared with a BMW, Mercedes-Benz, Audi, etc. These types of car brands have developed an aspirational type of marketing. People throughout their lives aspire to own a car from one of these brands. It depicts a status of success. This is particularly important for people in Mexico. Therefore, in Mexico, more than technological innovation, people seek social admiration.

Security:

Since Mexican President Andres Manuel Lopez Obredor (AMLO) began his six-year presidential term, Mexican car purchasers have had a car profile reduction. The main reason for this change to more austere cars comes because of the current increase of violence in the country. Mexicans that have the money to buy a Tesla, BMW, Mercedes-Benz, or other luxury vehicle. They just do not want to call attention to themselves, to try to reduce the risk of assault, kidnapping, etc. The average person who pays for bulletproof glass upgrades, to reduce violent risks in Mexico spends about 1 to 1.5 million pesos (USD equivalent here) in total (car price included) when their kids are in the ages of 16–20. This increases to a range of 2 to 5 million pesos (USD equivalent here) spent on a car when the person pays for their own car from the age of 35 to 50. If a Tesla Model 3 has a starting price of $ 1,049,900.00 MXN (USD equivalent here), and the average cost of bulletproofing a car in Mexico is 560,000 to 700,000 pesos (USD equivalent here) depending on the car, this gives almost no wiggle room on the price averages for the 16 to 20 kid age group to implement the bulletproof upgrades and increase Tesla sales in that market segment.

Opportunities

Manufacturing:

Mexico’s strategic geographical position makes it the bridge between the US and Canada and the rest of Latin America. It’s proximity to the US means it can deliver any cargo to any location in the continental US in less than 48 hours. Mexico is the tenth most populous country in the world with 126.2 million inhabitants resulting in more than 1/3 of the US population.

The Mexican Automobile Industry attracts USD $2 billion per year in foreign direct investment. Mexico is a trading partner with more than 50 countries, with agreements that reduce barriers to trade, including tariffs and import quotas and a strong cooperation in the exchange of goods and services. Mexico has a zero-rate value-added on exports (even when physically exported to a third party), and no local or state income taxes on corporate earnings. It also has value-added tax refunds for IMMEX certified manufacturers, among other benefits. The newly negotiated USMCA gives Tesla a USA, Mexico, and Canada all-around access of building a Gigafactory. By building a factory in Mexico, and with Mexico’s trade agreements with Central and South America, Tesla would have tariff-free access to several large growing markets.

The automotive industry in Mexico is listed in the top 10 exporters in the world. It is also the largest vehicle manufacturing country in Latin America. On average there are close to 1 million passenger cars sold in Mexico every year. When manufacturing in Mexico, the average line assembler hourly rate in Baja California is $2.60 USD an hour; that is a 64.13% decrease in nominal wage compared to the minimum wage in the US being $7.25 USD an hour. With immigration restrictions in the US preventing many talented engineers from working in the US, Tesla could tap into Mexico’s engineering talent pool with over 130,000 engineering graduates a year.

Commercial:

The Federal Law on New Automobiles Taxation exempts vehicles propelled by electric rechargeable batteries from fees concerning their sale or import. The CFE which is the largest electricity supply company in Mexico, promotes EVs through the installation of an independent light meter. This light meter prevents the applicable electricity tariff range from increasing, keeping the EV-user’s fee the domestic standard spectrum instead of the high consumption rate. On average there are 1,000 charging stations around the country mostly located in shopping centers, hotels, gas stations, and office buildings. In Mexico City (Metro area population: 22 million) local regulation promotes EVs: they are excluded from vehicle verification proceedings, they can circulate daily without limits (unlike other urban vehicles), public and private parking lots are required to provide exclusive parking spots for electric and hybrid vehicles, and public and private operators of public transportation electric or hybrid vehicles are exempt from the requirement of renewing their fleet every ten years.

Solutions

Price Point:

Mexico needs an ultra-priced product with all features included to appeal to the mass Mexican market, but the main target for Tesla shouldn’t be the mass Mexican market. Tesla should tap into the market of clients that buy a BMW, Mercedes-Benz, Audi, etc. This is the market that is going to pay $ 1,049,900.00 MXN ($ 48,964.71 USD) or more for a Tesla.

Low insurance Penetration:

Mexicans do not follow a culture of prevention, data shows, they prefer to pay for the consequences, rather than paying to prevent them. Tesla needs to focus on price reduction more than insurance services, to appeal to the market of clients that buy a BMW, Mercedes-Benz, Audi, etc.

Lack of financing:

Tesla must improve the interest rates of leases, and the schemes that are offered; that way making the car more accessible to the middle-class Mexican population.

Marketing:

In the late 90s Audi arrived to Mexico, and their integration is worth mentioning. Audi’s managing partners in Mexico started by setting up a series of breakfast meetings with Mexico’s most renowned businessmen. They would talk to them about the brand, its imbedded technology, and sold cars to them. By selling cars to Mexico’s most renowned businessmen, the car brand started to position itself as a car owned by Mexico’s high class, and employees of this businessmen started to notice and, as a result, most Mexicans started to aspire to own an Audi.

To successfully tap into the Mexican market Tesla must inspire the Mexican people. It must portray a sense of success, and it can use Elon Musk’s story to depict that image. The integration model applied by Audi to change the cultural view on their brand, to an aspirational car, can be applied to Tesla cars.

Influencers inspire people. In this case, you need influencers driving Teslas, with a target fan base of young Mexicans, with the economic possibility of buying a Tesla, BMW, or Audi.

Another way to market Tesla in Mexico could be by giving top hotels in Mexico Teslas. Hotels like The Four Seasons or The Ritz-Carlton can therefore use these cars to transport their guests. Tesla gets more exposure of their product, and an improvement in the Mexican cultural view, to transition to aspiration to own the car themselves.

Security:

To charge their Tesla, most Mexicans, for safety reasons, will prefer to charge their car at home. It is recommended that this service be offered more cheaply, and that advertising be increased.

To solve the bulletproof security upgrade dilemma, Tesla should offer the option to the Mexican consumer, of purchasing and implementing on any of teslas models, something similar to the cybertruck’s unique armored glass. This will improve safety concerns and increase sales.

Go electric!!

“For good ideas and true innovation, you need human interaction, conflict, argument, debate. “- Margaret Heffernan