Mexico favored by S. Korean EV component makers to circumvent U.S. trade restrictions

By Lim Chang-won Posted : July 7, 2022, 16:13 Updated : July 7, 2022, 16:48

[Courtesy of POSCO International]

SEOUL -- Mexico is emerging as a place favored by South Korean electric vehicle component makers to circumvent trade restrictions imposed by the United States where demand for electric vehicle components is increasing with the expansion of renewable energy and eco-friendly transportation means.

At Ramos Arizpe, a city in the Mexican state of Coahuila, POSCO International, a trading arm of South Korea's steel group POSCO, held a groundbreaking ceremony on July 6 for its plant to produce drive motor cores, a core component of electric vehicles. Some 160 billion won ($122 million) would be invested in the Mexican plant by 2030 to establish an annual production capacity of 1.5 million units.

Considering the U.S. import restrictions on electric steel sheets, which are used for motor cores, and the competitiveness of logistics, POSCO Internation will use Mexico as a production base targeting North America. POSCO International has set a goal of producing seven million units at home and abroad by 2030. 

"Using the Mexican plant as a bridgehead, we will strengthen our business in the North American electric vehicle parts market and establish ourselves as a key partner for global auto manufacturers," POSCO International CEO Ju Si-bo said.

In Durango, Mexico, a subsidiary of LS Electric, an electrical power equipment maker in South Korea, signed a memorandum of understanding to build a plant by 2023 for the production of parts such as electric vehicle relay and battery disconnect units. 

The high voltage DC relay can be applied to transportation systems, power systems, energy storage systems (ESS), and renewable energy systems. The rapid charger for electric vehicles switches AC to DC to supply electricity. The high voltage DC relay is installed between the battery and the inverter to cut off electricity or discharge DC power. It is also used between external chargers and vehicle batteries. 

It will be the first overseas plant to be built since LS e-Mobility Solutions was spun off from LS Electric in April. LS e-Mobility Solutions operates plants in South Korea and Wuxi, China. Wuxi, is a city near Shanghai in eastern China.         

The Mexican plant will serve as LS e-Mobility Solutions' outpost for targeting the North American automobile market. "Starting with investment in Mexico, we will speed up our business in the North American market, which is expected to see explosive growth due to a switch into eco-friendly mobility, through bold localization," an unnamed company official said in a statement. 

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