Global capital, electromobility, and productive restructuring: The political economy of the automotive industry in Mercosur

Abstract:

For over a decade, the automotive industry has been undergoing a disruptive transformation driven by the adoption of new production methods and the entry of new players, including both companies and countries, into vehicle manufacturing. This process reflects a structural transformation marked by the rise of electric vehicles (EVs), the use of lithium-ion batteries, and the integration of digital technologies—key elements of the new paradigm of sustainable transportation. Within this context, a renewed struggle for hierarchy in the energy transition emerges (Gracia Santos, Paz, Rísquez Ramos, 2024), generating new power dynamics in the configuration of global production and supply chains.

This global reconfiguration is transforming the socio-economic and environmental foundations underpinning the international division of labour, paving the way for an accumulation regime centred on “platform capitalism” (Srnicek, 2018) and a new global consensus—the “decarbonisation consensus”—that promotes the transition to a new energy matrix (Bringel and Svampa, 2023).

China’s leadership in “energy geopolitics,” consolidated through its technological and market dominance, has intensified its hegemonic rivalry with the United States. Simultaneously, events such as the COVID-19 pandemic, the conflict in Ukraine, and the war between Israel and Palestine have accelerated structural transformations within the automotive industry. This scenario underscores the necessity of analysing the industry’s development within Mercosur, given its relevance in debates about the future of regional production chains and its role in the transition to electromobility.

In the global value chain distribution, China leads not only in the manufacturing and sales of EVs but also in battery production capacity (holding nearly 80%) and key minerals such as graphite, aluminium, copper, and lithium. Latin America plays a significant role in the initial stages of the electromobility chain, particularly in mineral extraction. For instance, in lithium, Bolivia, Chile (30%), Argentina (5%), and Brazil (2%) stand out; in copper, Chile (15%), Mexico (3%), and Peru (5%) are noteworthy, while Brazil excels in graphite (7%) and nickel (3%). However, the region has a marginal share in EV production and exports, acting as a net importer, with two exceptions: Brazil, a net exporter of non-plug-in hybrid electric vehicles (HEVs), and Mexico, whose net exports of plug-in hybrid electric vehicles (PHEVs) remain marginal (IDB, 2023).

This study aims to analyse the scope and limitations of Mercosur within the framework of new paradigms of production and capital accumulation in the automotive industry. To this end, it proposes a critical examination of the political economy of Mercosur’s automotive sector, considering the contemporary international context characterised by the resurgence of protectionism, industrial policies, and a questioning of globalisation.

Key questions guiding this research include:
• How is the political economy of Mercosur’s automotive sector shaped by the structural transformations in the global industry?
• What role does Mercosur play in the new global productive geography of the automotive industry?
• Why are productive integration and complementarity essential for the development of strategic sectors such as automotive manufacturing?

The automotive chain in Mercosur comprises two main sectors: the automotive industry (assembly plants) and the auto parts industry. These sectors account for 4% of Brazil’s GDP (Anfavea, 2019) and 1% of Argentina’s GDP (SPE, 2018). Additionally, they represent 11% of total exports and 6% of formal industrial employment in Argentina and 22% of manufacturing GDP in Brazil (Dulcich, 2021). Automotive manufacturing reflects the preferences of both transnational and local companies, as well as the interests of countries in maintaining a regional manufacturing base.

Regional regulation, particularly the Economic Complementation Agreement (ACE) No. 14 between Brazil and Argentina, imposes tariffs of 35% on most extra-zone vehicles and 14%-18% on auto parts, while also regulating bilateral trade through the "flex coefficient" to avoid trade imbalances. Two recent regulatory changes have significantly impacted this chain: the signing of the Mercosur-EU Agreement (initially reached in June 2019 and finalised in December 2024) and the modifications introduced by Protocol 43 of ACE No. 14 in October 2019, which represent a gradual deregulation of bilateral trade in vehicles and auto parts (Dulcich, 2021).

This analysis is framed within critical international political economy (CIPE), which examines how global power dynamics, often benefiting the industrialised North, shape the trajectory of automotive regionalism (Rodríguez Díaz, 2023). It also explores how these dynamics perpetuate an unequal distribution of the costs and benefits of the transition to electromobility between societies in the centre and the periphery.
The methodology involves a comprehensive review of specialised literature and the analysis of various databases through descriptive statistics. The study is structured into four main sections. The first section addresses the global context of the automotive industry, highlighting structural transformations driven by the transition to electromobility and the emergence of new production paradigms. The second section analyses the configuration of Mercosur’s automotive political economy, considering its regulatory framework, key actors, and regional integration dynamics. The third section examines the implications of these processes for the unequal distribution of the costs and benefits of the energy transition. Finally, the fourth section presents conclusions, reflecting on the challenges and opportunities for Mercosur in the context of new global dynamics and proposing courses of action to strengthen regional integration and its role in the global automotive industry.

Full Text:

For over a decade, the automotive industry has been undergoing a disruptive transformation driven by the adoption of new production methods and the entry of new players, including both companies and countries, into vehicle manufacturing. This process reflects a structural transformation marked by the rise of electric vehicles (EVs), the use of lithium-ion batteries, and the integration of digital technologies—key elements of the new paradigm of sustainable transportation. Within this context, a renewed struggle for hierarchy in the energy transition emerges (Gracia Santos, Paz, Rísquez Ramos, 2024), generating new power dynamics in the configuration of global production and supply chains.

This global reconfiguration is transforming the socio-economic and environmental foundations underpinning the international division of labour, paving the way for an accumulation regime centred on “platform capitalism” (Srnicek, 2018) and a new global consensus—the “decarbonisation consensus”—that promotes the transition to a new energy matrix (Bringel and Svampa, 2023).

China’s leadership in “energy geopolitics,” consolidated through its technological and market dominance, has intensified its hegemonic rivalry with the United States. Simultaneously, events such as the COVID-19 pandemic, the conflict in Ukraine, and the war between Israel and Palestine have accelerated structural transformations within the automotive industry. This scenario underscores the necessity of analysing the industry’s development within Mercosur, given its relevance in debates about the future of regional production chains and its role in the transition to electromobility.

In the global value chain distribution, China leads not only in the manufacturing and sales of EVs but also in battery production capacity (holding nearly 80%) and key minerals such as graphite, aluminium, copper, and lithium. Latin America plays a significant role in the initial stages of the electromobility chain, particularly in mineral extraction. For instance, in lithium, Bolivia, Chile (30%), Argentina (5%), and Brazil (2%) stand out; in copper, Chile (15%), Mexico (3%), and Peru (5%) are noteworthy, while Brazil excels in graphite (7%) and nickel (3%). However, the region has a marginal share in EV production and exports, acting as a net importer, with two exceptions: Brazil, a net exporter of non-plug-in hybrid electric vehicles (HEVs), and Mexico, whose net exports of plug-in hybrid electric vehicles (PHEVs) remain marginal (IDB, 2023).

This study aims to analyse the scope and limitations of Mercosur within the framework of new paradigms of production and capital accumulation in the automotive industry. To this end, it proposes a critical examination of the political economy of Mercosur’s automotive sector, considering the contemporary international context characterised by the resurgence of protectionism, industrial policies, and a questioning of globalisation.

Key questions guiding this research include:
• How is the political economy of Mercosur’s automotive sector shaped by the structural transformations in the global industry?
• What role does Mercosur play in the new global productive geography of the automotive industry?
• Why are productive integration and complementarity essential for the development of strategic sectors such as automotive manufacturing?

The automotive chain in Mercosur comprises two main sectors: the automotive industry (assembly plants) and the auto parts industry. These sectors account for 4% of Brazil’s GDP (Anfavea, 2019) and 1% of Argentina’s GDP (SPE, 2018). Additionally, they represent 11% of total exports and 6% of formal industrial employment in Argentina and 22% of manufacturing GDP in Brazil (Dulcich, 2021). Automotive manufacturing reflects the preferences of both transnational and local companies, as well as the interests of countries in maintaining a regional manufacturing base.

Regional regulation, particularly the Economic Complementation Agreement (ACE) No. 14 between Brazil and Argentina, imposes tariffs of 35% on most extra-zone vehicles and 14%-18% on auto parts, while also regulating bilateral trade through the "flex coefficient" to avoid trade imbalances. Two recent regulatory changes have significantly impacted this chain: the signing of the Mercosur-EU Agreement (initially reached in June 2019 and finalised in December 2024) and the modifications introduced by Protocol 43 of ACE No. 14 in October 2019, which represent a gradual deregulation of bilateral trade in vehicles and auto parts (Dulcich, 2021).

This analysis is framed within critical international political economy (CIPE), which examines how global power dynamics, often benefiting the industrialised North, shape the trajectory of automotive regionalism (Rodríguez Díaz, 2023). It also explores how these dynamics perpetuate an unequal distribution of the costs and benefits of the transition to electromobility between societies in the centre and the periphery.
The methodology involves a comprehensive review of specialised literature and the analysis of various databases through descriptive statistics. The study is structured into four main sections. The first section addresses the global context of the automotive industry, highlighting structural transformations driven by the transition to electromobility and the emergence of new production paradigms. The second section analyses the configuration of Mercosur’s automotive political economy, considering its regulatory framework, key actors, and regional integration dynamics. The third section examines the implications of these processes for the unequal distribution of the costs and benefits of the energy transition. Finally, the fourth section presents conclusions, reflecting on the challenges and opportunities for Mercosur in the context of new global dynamics and proposing courses of action to strengthen regional integration and its role in the global automotive industry.