As Chinese electric vehicle (EV) makers face tariffs that block them from the U.S. market, they have turned to Mexico as a new hotspot for selling their high-tech cars. Last year, China became the leading car supplier to Mexico, exporting $4.6 billion worth of vehicles to the country. The Mexican Ministry of Economy reported that even customers who were initially wary of EVs have been won over by the affordable price tags offered by Chinese automakers like BYD, which sells its Dolphin Mini in Mexico for around $21,300, significantly cheaper than the cheapest Tesla model.
„The Chinese automakers came to the country very aggressively,“ said Juan Carlos Baker, former Mexican deputy minister for international trade. „They have very good promotions. It’s a good product that sells at a very reasonable price.“ This aggressive approach has led some Chinese EV makers, including BYD, to explore setting up factories in Mexican states like Durango, Jalisco, and Nuevo Leon. BYD has claimed that a plant in Mexico could create around 10,000 jobs, providing an economic boost to the country.
However, U.S. officials are concerned that Mexico could be used as a „backdoor“ for Chinese automakers to enter the American market and circumvent trade restrictions. Scott Paul, president of the Alliance for American Manufacturing, explained, „Mexico is an attractive production platform, not only for Chinese companies but for other companies as well, in part because of the free trade access it has to the American market. And it can do something that in trade terms is called circumvention.“
The United States-Mexico-Canada Agreement (USMCA), a revised version of the North American Free Trade Agreement (NAFTA), allows goods manufactured in Canada or Mexico with locally sourced materials to be exported to the U.S. duty-free. This provision has raised concerns among U.S. lawmakers and auto companies, who fear that Chinese EV makers setting up in Mexico could pose a significant threat to American automakers due to lower production costs.
In response to these concerns, President Joe Biden announced a 100% tariff on Chinese EVs in May. Scott Paul emphasized the need to protect the growing EV industry in the U.S., describing it as an „infant industry“ that requires significant support and protection during its development phase.
The pressure from the U.S. leaves Mexico in a challenging position, as it must balance maintaining its crucial relationship with America while also managing Chinese investment in its automotive sector. CNBC reached out to the Mexican government and Chinese automakers like BYD, SAIC, and Chery for comment, but none responded.
As Mexico emerges as a hot spot for Chinese auto companies, the next administration’s policies on EV trade will likely have a significant impact on the industry. It remains to be seen how Mexico will navigate its relationship with both the U.S. and Chinese automakers in the evolving landscape of the global automotive market.