Stellantis NV is considering renovating a plant in Mexico to build hybrid and electric vehicles as it transforms its lineup to meet growing demand for battery-powered transportation.
The owner of the Jeep, Peugeot and Ram brands is contemplating remodeling its factory in Saltillo, Coahuila, one of Mexico's northern industrial centers about 200 miles from the Texas border, according to people familiar with the deliberations, who asked not to be named because they were not authorized to speak publicly.
The company is also evaluating the possibility of investing in the State of Mexico, where it also has a plant in the city of Toluca, or, alternatively, in the state of Sonora, although Saltillo is the favorite in terms of potential sites, one of the people said. The investment would be in the range of billions of dollars and would occur in the next few years, he said.
Plans have not been finalized and could still change, the people said.
"We regularly invest in plants around the world to improve in terms of process, vehicle production or adapt to electrification as part of our US$35 billion investment in electrification and software announced during our EV Day a year ago," Shawn Morgan, a company spokeswoman, said in an email response to questions.
Mexican President Andres Manuel Lopez Obrador, Finance Secretary Rogelio Ramirez de la O. and Economy Secretary Tatiana Clouthier met on July 20 with Stellantis executives, including CEO Carlos Tavares, to discuss electric vehicles and the desire to strengthen the company's supply chain in Mexico, Clouthier said at the time.
One of the company's concerns has been making sure it has an adequate electricity supply for its plant, according to two of the people familiar with its plans.
The energy issue and Lopez Obrador's moves to prioritize the state-owned electricity provider over private and foreign companies have raised concerns among companies. Last month, the U.S. and Canadian governments requested formal consultations with the Mexican government, alleging that its current policies violate the 2020 free trade agreement between the three nations.
In a tweet following last month's meeting with Stellantis, Ramirez de la O, the secretary of finance, said the company's investments in Mexico will create jobs and that the country can help companies ensure sufficient energy supply and a realistic and effective transition to clean energy.
At its Toluca assembly plant, Stellantis already manufactures the Jeep Compass compact crossover. The automaker plans to bring electrified versions of the Compass to that plant in 2024, according to Sam Fiorani, vice president of AutoForecast Solutions in Chester Springs, Pennsylvania.
Stellantis plants in Saltillo produce the Ram 1500 and heavy-duty pickup trucks, and the Ram ProMaster Van, which Tavares has pointed to as a key product to take advantage of demand for electric vans from e-commerce companies such as Amazon.com Inc.
The automaker's strategic plan calls for it to make 75 all-electric models by the end of the decade and convert 50% of U.S. sales and 75% of European sales to battery-powered vehicles.
Clouthier, the economy secretary, said in May in an interview that a major U.S. automaker was planning to make an investment in northern Mexico and that the announcement would come shortly. Stellantis was formed last year from the mega-merger between Fiat Chrysler, one of the big three U.S. automakers, and PSA Group.
Mexico has long been a hub for auto production aimed at foreign buyers, and a roster of major automakers and parts suppliers have announced new investments. General Motors Co. is manufacturing its Chevrolet Blazer and Equinox in Mexico, while Ford Motor Co. increased production of its Mach-E Mustang.
Contemporary Amperex Technology Co. Ltd., the world's largest maker of batteries for electric vehicles, is considering at least two locations in northern Mexico, including Saltillo, to build a plant that would supply Tesla Inc. and Ford, Bloomberg News reported last month.
Mexican state governments have been providing incentives to attract investment. Tesla even got its own border lane into Texas to allow its suppliers in the neighboring state of Nuevo Leon to reduce wait times.