Will Tesla enter the South American market?

Well, it seems so. Tesla could be preparing to land in South America, according to a job posting posted in Chile. Electric car maker Tesla has revealed its plans to expand its global presence by entering the South American market, with Chile as its first stop.

Before you think buy Tesla stock You should know that job openings include sales, service, and delivery positions. The move marks an important step for Tesla, which until now has focused primarily on North America, Europe and Asia. With its expansion in South America, Tesla is not only opening up a new market for its electric vehicles, but is also looking to capitalize on the region’s growing interest in renewable energy and sustainable transportation.

In the job description, the automaker wrote: Tesla Motors is looking for a Country General Manager, Chile to help launch the market. He will be our brand ambassador in the market and will play a vital role in shaping our corporate image while accelerating the transition to sustainable energy.

A country manager is usually the first person hired when Tesla expands into a new market. The position will be based in Santiago, the capital of Chile, where the company is also looking for some Tesla consultants and service technicians.

Why disembark in South America via Chile?

According to some media in the Southern Cone, Tesla’s decision Entry into the Chilean market is likely influenced by the country’s commitment to reducing carbon emissions and its favorable renewable energy policy.

Chile has taken significant steps to promote the adoption of electric vehicles as part of its strategy to reduce its dependence on fossil fuels and combat climate change. By establishing a presence in Chile, Tesla is looking to capitalize on this growing demand for electric vehicles.

Chile is an interesting option for the first entry into the South American market. Only about 234,000 cars have been sold in the Chilean car market so far this year, down 29% from the previous year. And that is approximately the number of vehicles sold in Brazil each month.

This supports the interest of companies like Tesla and local investors to buy shares of companies like the American one. Although the country’s car market is small, there is a lot of interest in electric vehicles, which could explain Tesla’s foray.

Tesla’s strategy in the lithium market

The country is rich in lithium, the basic material for electric vehicle batteries, which has contributed to the creation of interest in this type of vehicle. The government also announced an initiative to allow the sale of new electric vehicles in the country only from 2035.

Tesla’s Chinese competitor, BYD, has targeted the South American market by launching its cheaper electric cars made in China, but now it seems that Tesla is willing to test the market in the higher range.

On the other hand, the company’s entry into the Chilean market is expected to promote the adoption of electric vehicles in the country and contribute to the development of the local electric vehicle market. With Tesla’s reputation as a maker of high-quality electric vehicles (which is why many investors are interested in buying shares), its entry into Chile could potentially encourage more consumers to switch to electric vehicles, accelerating the country’s transition to sustainable transportation.

In addition to its strategic business expansion, Tesla is in talks with Sociedad QuĂ­mica y Minera de Chile (SQM), Chile’s largest lithium producer, to secure supplies of lithium, a key component of electric car batteries. The talks could lead Tesla to build a processing plant in Chile to produce high-quality lithium for its batteries, further cementing its presence in the country.

As a major lithium producer with abundant reserves in the Atacama desert, Chile provides Tesla with a strategic advantage in ensuring a reliable supply of lithium.

Other car companies with an interest in South America, such as Toyota, Volkswagen (VW), Stellantis, General Motors and Renault, are among the market leaders in the region. These car companies are particularly interested in Brazil, Chile and Argentina as engines of growth.

But vulnerabilities remain across the continent And they know this and have to evaluate whether they are going to buy the stock. Rising unemployment, poverty and social and political instability are prevalent in some countries and cannot be ignored when planning investments.

Strong investment for the region

VW has announced that it will invest 1 billion euros in the region until 2026. These funds will mainly help the development of ethanol-based combustion engines and new business models, including subscription cars. This makes VW shares interesting to buy.

In Brazil, the largest car market in the region, the German manufacturer expects to grow by 40% by 2027. The brand first entered the country about 70 years ago and has big plans for the future. Although the electric vehicle (EV) market in Brazil remains small, VW plans to launch five new electric and flex-fuel models by 2025. The company also plans to launch hybrid vehicles in the medium term.

But before that, VW will bring its first fully electric models to Brazil, with the ID.4 and ID.Buzz available there in late 2023. The brand plans to offer these battery electric vehicles (BEVs) as part of its subscription model.

Last year, VW sold about 3,000 cars in Brazil. Although the total share of fully electric vehicles in the country is estimated to represent only 4% of the market in 2033, VW wants to grow faster in the BEV segment.

Also from Chinese companies

Chinese automakers are also looking for opportunities, particularly in Brazil’s electric vehicle market, which has a huge untapped potential. But compared to other regions, barriers to EV adoption remain. This is mainly due to weak tax incentives, insufficient charging infrastructure and a lack of models to meet consumer needs, as well as public reluctance.

Even so, the government is trying to attract international operators and awareness of supporting more sustainable modes of transport is growing. BYD, the world’s largest manufacturer of electric cars (including plug-in hybrids), sensed its opportunity. Of course, buying shares of Chinese companies is not easy.

The company is investing 3 billion reais in new production facilities in northeastern Brazil. The aim is to increase local production and offer models at more competitive prices.

The center, which will consist of three floors, will rise on land formerly used by Ford. One of them will produce electric vehicles, another will produce chassis for electric buses and trucks, and the third will process lithium iron phosphate for the international market.

South America is a key region for Chinese automakers who want to expand into new markets and gain access to resources. Great Wall Motor (GWM), for example, last year acquired a factory in Brazil that it hopes to put into operation in the second half of 2023. The manufacturer plans to invest around 1.9 billion euros in Brazil over the next 10 years. Interesting, isn’t it? All the more reason to buy stocks.

The importance of sustainable sourcing

“Sustainable” mining has become a necessity for car companies. The Initiative for Responsible Mining Assurance (IRMA), which independently assesses mines in South America and other parts of the world, has seen a large number of car manufacturers join its mission. These include BMW, Mercedes-Benz, Tesla, Volkswagen, Ford and Rivian.

Sustainability is becoming increasingly important when buying shares in a company, and those in the automotive sector are no strangers to this trend. The association is proud to be the only organization with a global standard covering all mined materials. In Brazil, Chile and Argentina, South American mines are evaluated independently.

One of them is Livent, which is committed to responsibly mining lithium from a deposit in Argentina. BMW has a multi-year contract worth around 285 million euros with Livent, under which it supplies lithium directly to the German manufacturer’s battery manufacturers.

But lithium is not the only interesting material. In early 2023, Stellantis announced the purchase of a minority stake in a copper mine in Argentina worth $155 million. The automaker acquired a 14.2% stake in McEwen Copper, owner of the Los Azules project in Argentina.

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