Charles W. Thurston, Latin America Correspondent02.21.25
Volkswagen’s new paint shop in Puebla, Mexico, has become the first in the global auto industry to adopt an all-electric energy solution, along with an array of high-technology improvements, according to the company. The change will embrace the expansion of the facility to produce electric vehicles.
The Puebla plant has eliminated the use of natural gas yet has an “ability to paint up to 90 vehicles per hour while maintaining high environmental standards,” the company notes. The conversion of the plant — including advanced automation and AI-driven quality control — has taken two years and $764 million worth of investment.
The Puebla rebuild “aligns with the [parent] company’s Way to Zero strategy, which aims for a 40% reduction in CO2 emissions per vehicle in Europe by 2030 and full carbon neutrality by 2050,” said Holger Nestler, president and CEO of Volkswagen de México, in a statement.
The Puebla paint line conversion to electricity also means Volkswagen is supporting the Mexican government plan to increase the share of renewable energies to 45% by 2030.
Prior to the Trump administration’s announcement of 25% import tariffs on Mexico, the Mexican automotive OEM coatings market was predicted to grow at 4.7% per year between 2025 and 2030 by market analyst Mordor Intelligence.
“The increased use of polyurethane coatings, due to stringent government regulations for a greener and more sustainable environment, is expected to provide tremendous opportunities for market growth in Mexico in the coming years,” Mordor concluded.
The Puebla plant, southeast of Mexico City, is the company’s largest in the country, with close to 15,000 employees, covering an area of about 3 million square meters. As such, Puebla is the largest automotive plant in Mexico, the company says.
“The Puebla plant employs about 6,100 assembly line workers, 5,000 supervisory or trusted employees, and thousands of parts-assembly workers and makes 2,300 vehicles per day. In 2023, more than 300,000 of those vehicles were exports with 67 percent for sale in the U.S. market,” notes the U.S. Department of Labor, which has mediated labor disputes at the plant.
Volkswagen de México produces the Jetta, the Tiguan Long Version and the Taos in Puebla. When Volkswagen began production of the new Taos at Puebla last year, it marked the second manufacturing start-up in three months, following the launch of the new Jetta in July, the company stated. The first units of the Taos will be destined for the Mexican market and North America. In 2023, Volkswagen de Mexico reported that it produced 349,227 vehicles.
That number should rise. Volkswagen is transferring production of the Golf and the Golf Estate to Puebla over the next two years to enable the Wolfsburg plant in Lower Saxony, Germany, to focus on the nine emerging EV lines in Europe, planned for a 2027 sales start. So far, 200,000 Golf vehicles were sold in Europe over the first three quarters of 2024.
“Looking ahead, the market is expected to experience a steady annual growth rate (CAGR 2025-2029) of 9.02%, leading to a projected market volume of $53.4 billion by the year 2029.
“Furthermore, it is anticipated that the unit sales of the electric vehicles market in Mexico will reach 56.77k vehicles by 2029. Mexico is experiencing a surge in the popularity of electric vehicles as the government implements policies to promote their adoption,” Statista continues.
Mexico’s automotive industry association, La Asociacion Mexicana de la Industria Automotriz (AMIA) reported that in January of this year, sales of EVs, hybrid vehicles, and plug-in hybrids were up 35.6% to 10,881 units, compared with January 2024. As such, the three classes of vehicles represented 9.1% of all cars sold in January of this year.
“Last year the United States imported 3.6 million light vehicles from Canada and Mexico, according to analyst firm S&P Global Mobility, [equal to] 70% of the 5.3 million light vehicles built in those neighboring countries and equal to 22% of all vehicles sold in the United States,” reported Supply Chain Planning in February.
Fitch Ratings sees the potential damage to Mexican automotive exports as critical. “The Trump administration’s announcement of a 25% tariff on all Mexican imports highlights potential trade risks for Mexico that are significantly worse than Fitch Ratings’ baseline assumptions. A one-month pause in the implementation of the tariffs allows time for negotiation on trade and other non-economic issues, offering Mexico a path to avoid this negative outcome. However, U.S. protectionism and the related uncertainty it brings remain a serious risk,” Fitch opined in early February.
“Mexico is highly vulnerable to U.S. trade protectionism as the largest goods exporter to the U.S. These exports surpassed $500 billion in 2024, equivalent to 28% of Mexico’s GDP. Mexican and U.S. industries are integrated via long-established supply chains that benefit from the absence of duties on most goods under the United States-Mexico-Canada Agreement (USMCA) trade agreement. The current effective U.S. tariff rate on Mexican goods is just 0.3%,” Fitch calculates.
“We view some form of tariffs as a material risk for Mexico,” the agency says. “If implemented, the across-the-board 25% tariff would have a much larger impact, likely causing a recession in Mexico in 2025 and reducing the country’s output by 3.0 percentage points by 2026,” Fitch reckons.
The Puebla plant has eliminated the use of natural gas yet has an “ability to paint up to 90 vehicles per hour while maintaining high environmental standards,” the company notes. The conversion of the plant — including advanced automation and AI-driven quality control — has taken two years and $764 million worth of investment.
The Puebla rebuild “aligns with the [parent] company’s Way to Zero strategy, which aims for a 40% reduction in CO2 emissions per vehicle in Europe by 2030 and full carbon neutrality by 2050,” said Holger Nestler, president and CEO of Volkswagen de México, in a statement.
The Puebla paint line conversion to electricity also means Volkswagen is supporting the Mexican government plan to increase the share of renewable energies to 45% by 2030.
Automotive Paint Demand in Question
Overall, the automotive OEM coatings market in Mexico is expected to reach $627.5 million by 2030, according to a Google AI search. The market is shared by five major players: AkzoNobel, Axalta, BASF, PPG and Sherwin-Williams.Prior to the Trump administration’s announcement of 25% import tariffs on Mexico, the Mexican automotive OEM coatings market was predicted to grow at 4.7% per year between 2025 and 2030 by market analyst Mordor Intelligence.
“The increased use of polyurethane coatings, due to stringent government regulations for a greener and more sustainable environment, is expected to provide tremendous opportunities for market growth in Mexico in the coming years,” Mordor concluded.
Volkswagen EV Lines to Expand
At a European company meeting in February, Volkswagen announced plans to produce an entry-level EV with a public launch in early March. The world premiere of the production model is scheduled for 2027, with a base price of about €20,000.The Puebla plant, southeast of Mexico City, is the company’s largest in the country, with close to 15,000 employees, covering an area of about 3 million square meters. As such, Puebla is the largest automotive plant in Mexico, the company says.
“The Puebla plant employs about 6,100 assembly line workers, 5,000 supervisory or trusted employees, and thousands of parts-assembly workers and makes 2,300 vehicles per day. In 2023, more than 300,000 of those vehicles were exports with 67 percent for sale in the U.S. market,” notes the U.S. Department of Labor, which has mediated labor disputes at the plant.
Volkswagen de México produces the Jetta, the Tiguan Long Version and the Taos in Puebla. When Volkswagen began production of the new Taos at Puebla last year, it marked the second manufacturing start-up in three months, following the launch of the new Jetta in July, the company stated. The first units of the Taos will be destined for the Mexican market and North America. In 2023, Volkswagen de Mexico reported that it produced 349,227 vehicles.
That number should rise. Volkswagen is transferring production of the Golf and the Golf Estate to Puebla over the next two years to enable the Wolfsburg plant in Lower Saxony, Germany, to focus on the nine emerging EV lines in Europe, planned for a 2027 sales start. So far, 200,000 Golf vehicles were sold in Europe over the first three quarters of 2024.
Mexican EV Growth Anticipated
Market Analyst Statista projected that “in 2025, revenue in the electric vehicles market in Mexico will reach a staggering amount of $37.8 billion.“Looking ahead, the market is expected to experience a steady annual growth rate (CAGR 2025-2029) of 9.02%, leading to a projected market volume of $53.4 billion by the year 2029.
“Furthermore, it is anticipated that the unit sales of the electric vehicles market in Mexico will reach 56.77k vehicles by 2029. Mexico is experiencing a surge in the popularity of electric vehicles as the government implements policies to promote their adoption,” Statista continues.
Mexico’s automotive industry association, La Asociacion Mexicana de la Industria Automotriz (AMIA) reported that in January of this year, sales of EVs, hybrid vehicles, and plug-in hybrids were up 35.6% to 10,881 units, compared with January 2024. As such, the three classes of vehicles represented 9.1% of all cars sold in January of this year.
Import Tariff Uncertainty
The Trump administration has threatened to impose a 25% tariff on Canadian and Mexican exports, which could include vehicles produced there. The impact could be huge, since Canada and Mexico produce nearly a quarter of all cars sold in the United States.“Last year the United States imported 3.6 million light vehicles from Canada and Mexico, according to analyst firm S&P Global Mobility, [equal to] 70% of the 5.3 million light vehicles built in those neighboring countries and equal to 22% of all vehicles sold in the United States,” reported Supply Chain Planning in February.
Fitch Ratings sees the potential damage to Mexican automotive exports as critical. “The Trump administration’s announcement of a 25% tariff on all Mexican imports highlights potential trade risks for Mexico that are significantly worse than Fitch Ratings’ baseline assumptions. A one-month pause in the implementation of the tariffs allows time for negotiation on trade and other non-economic issues, offering Mexico a path to avoid this negative outcome. However, U.S. protectionism and the related uncertainty it brings remain a serious risk,” Fitch opined in early February.
“Mexico is highly vulnerable to U.S. trade protectionism as the largest goods exporter to the U.S. These exports surpassed $500 billion in 2024, equivalent to 28% of Mexico’s GDP. Mexican and U.S. industries are integrated via long-established supply chains that benefit from the absence of duties on most goods under the United States-Mexico-Canada Agreement (USMCA) trade agreement. The current effective U.S. tariff rate on Mexican goods is just 0.3%,” Fitch calculates.
“We view some form of tariffs as a material risk for Mexico,” the agency says. “If implemented, the across-the-board 25% tariff would have a much larger impact, likely causing a recession in Mexico in 2025 and reducing the country’s output by 3.0 percentage points by 2026,” Fitch reckons.
