(Bloomberg) -- Stellantis NV is considering renovating a plant in Mexico to build hybrid and electric vehicles as it transforms its lineup to meet surging demand for battery-powered transport.
The owner of the Jeep, Peugeot and Ram brands is contemplating a retooling of its factory in Saltillo, Coahuila, one of northern Mexico’s industrial hubs about 200 miles from the Texas border, according to people familiar with the deliberations, who asked not to be named without permission to speak publicly.
The company is also evaluating the possibility of instead investing in Mexico state, where it also has a plant in the city of Toluca, or in Sonora state, although Saltillo is the front-runner in terms of potential sites, one of the people said. The investment would be in the multibillion-dollar range and would occur over the coming years, the person said.
The plans haven’t been finalized and could still change, the people said.
“We invest regularly in plants all around the world to upgrade in terms of process, vehicle production or adapt to electrification as part of our $35 billion investment in electrification and software announced during our EV Day one year ago,” Shawn Morgan, a company spokeswoman, said in an emailed response to questions.
Mexican President Andres Manuel Lopez Obrador, Finance Minister Rogelio Ramirez de la O and Economy Minister Tatiana Clouthier met with Stellantis executives including Chief Executive Officer Carlos Tavares on July 20 to discuss electric vehicles and the desire to strengthen the company’s supply chain in Mexico, Clouthier said at the time.
One concern for the company has been ensuring that it has adequate electricity supply for its plant, according to two of the people familiar with its plans.
The issue of energy and Lopez Obrador’s moves to prioritize the state electricity provider at the expense of private and foreign companies have sparked outcry from firms. The governments of the US and Canada last month requested formal talks with the Mexican government, alleging that its current policies violate a 2020 free-trade agreement between the three nations.
In a tweet after last month’s meeting with Stellantis, Ramirez de la O, the finance minister, said that the company’s investments in Mexico will create jobs, and that the nation can help firms ensure sufficient energy supply and a realistic and effective transition to clean energy.
Stellantis already makes the compact Jeep Compass crossover at its Toluca assembly plant. The automaker plans to bring electrified versions of the Compass to that plant in 2024, according to Sam Fiorani, vice president at AutoForecast Solutions in Chester Springs, Pennsylvania.
Stellantis’s plants in Saltillo produce its Ram 1500 and heavy-duty pickup trucks, and the Ram ProMaster Van, which Tavares has flagged as a key product to tap demand for electric vans from e-commerce companies such as Amazon.com Inc.
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The automaker’s strategic plan calls for it to make 75 fully electric models by the end of the decade and convert 50% of US sales and 75% of European sales to battery-powered vehicles.
Clouthier, the economy minister, said in a May interview that a big US automaker was eyeing an investment in northern Mexico and that an announcement would come shortly. Stellantis was formed last year from the megamerger between Fiat Chrysler -- one of the original US big three automakers -- and PSA Group.
Mexico has long been a hub for auto production directed at foreign buyers, and a slate of major auto companies and parts providers have announced new investments. General Motors Co. is making its Chevrolet Blazer and Equinox in Mexico, as Ford Motor Co. ramps up production of its Mustang Mach-E.
China’s Contemporary Amperex Technology Co. Ltd., the world’s biggest maker of batteries for electric vehicles, is considering at least two locations in northern Mexico, including Saltillo, for a plant to supply Tesla Inc. and Ford, Bloomberg News reported last month.
The governments of Mexican states have been providing incentives to attract investment, with Tesla even getting its own border lane to Texas to allow its suppliers in the neighboring state of Nuevo Leon to reduce wait times.
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