This story originally appeared in WIRED in Spanish and has been translated from Spanish.
China has positioned itself as the Main supplier of automobiles in Mexicowith exports expected to reach $4.6 billion in 2023, according to data from Mexico’s Ministry of Economy.
Chinese carmaker BYD overtook Honda and Nissan to position itself as the world’s seventh-largest automaker by number of units sold during the April-June quarter. This growth was driven by increased demand for its affordable electric vehicles, according to data from automakers and research firm MarkLines.
The company New Vehicle Sales increased by 40 percent year over year BYD sold 980,000 units in the quarter, the same quarter in which most major automakers, including Toyota and Volkswagen, experienced a decline in sales. Much of BYD’s growth is attributed to its overseas sales, which nearly tripled in the past year to 105,000 units. BYD is now considering locating its new automotive plant in three Mexican states: Durango, Jalisco and Nuevo Leon.
Foreign investment would be an economic boost for Mexico. The company has said a plant there would create around 10,000 jobs. Tesla competitor, BYD markets its Mini Dolphin model in Mexico for about 398,800 pesos (about 21,300 dollars), a little more than half the price of Tesla’s cheapest model.
Chinese electric vehicle makers, unable to sell their products to the United States due to tariffs, have been exploring other markets to sell their high-tech cars. However, as Mexico establishes itself as a key market for Chinese electric vehicles, officials in Washington fear that Mexico could be used as a “back door” to access the U.S. market.
This duty-free access is part of the Agreement between the United States, Mexico and Canada (USMCA), an updated version of the North American Free Trade Agreement that, starting in 2018, eliminated tariffs on many products traded between North American countries. Under the agreement, if a foreign auto company that makes vehicles in Canada or Mexico can prove that the materials used are locally sourced, its products can be exported to the United States virtually tariff-free.
According to official figures, 20 percent of light vehicles sold last year in Mexico were imported from China, representing 273,592 units and an increase of 50 percent compared to 2022. Currently, most vehicles imported from China come from Western brands that have manufacturing plants established in that country, such as General Motors, Ford, Chrysler, BMW and Renault.
Mexico is the second largest market for Chinese cars worldwide, behind only Russia, according to data from Linked Global Solutions, a company specializing in business between China and Latin American countries.
A trade war against China
Both the United States and the European Union have escalated a trade war against China, focusing on the production of automobiles and semiconductor chips, which have been the subject of investigations for predatory practices, tariffs and restrictions. This new geopolitical strategy is driving Western companies to look for alternatives to relocate their factories outside China, a trend known as “nearshoring.”
Concerned about the potential impact on domestic automakers, the United States has raised tariffs on Chinese-made electric vehicles to 100 percent. Canada is also considering implementing its own tariffs on Chinese-made vehicles.