It’s an open secret in the automotive industry that BYD, a leading Chinese plug-in hybrid and electric vehicle manufacturer, intends to construct a factory in Mexico. This move would provide a theoretical gateway for BYD to enter the lucrative United States market. Already enjoying strong sales in Mexico, it makes strategic sense to produce their cars there as well.
Zhou Zou, the country manager of BYD Mexico, disclosed in an interview with Nikkei Asia in Mexico City that BYD is “considering” establishing a plant in Mexico, specifically as an export hub to the U.S. Although there have been previous speculations about this move, this is one of the occasions where a BYD executive has openly addressed the plan.
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China’s automakers have global dreams
Chinese automakers, including BYD, aspire for global expansion, particularly in the electric vehicle segment. While steep tariffs currently prevent Chinese car sales in the U.S., setting up factories in Mexico presents a likely solution to bypass those restrictions.
Nikkei Asia reports that BYD has initiated a “feasibility study” for a Mexican plant, which would add to its extensive manufacturing footprint in Brazil, Hungary, and Thailand. Having achieved record sales of over 3 million cars in 2023, BYD aims to broaden its presence in Latin America, Europe, and other parts of Asia. Zou revealed that the top candidates for the factory’s location in Mexico include Nuevo Leon in northern Mexico and the Yucatan Peninsula.
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BYD’s presence in Mexico and Latin America is gaining momentum, marked by robust sales in the region. An additional triumph for the Mexican plant would be the opportunity to penetrate the American market, where several automakers are grappling with uncertain electric vehicle demand. The steep 27.5% tariffs imposed on Chinese-made cars are a significant barrier, but cars produced in Mexico, even by Chinese-owned companies, are not subject to the same tariffs. While there is the possibility of U.S. legislators imposing further restrictions, the current situation allows for an advantageous position to launch into the American market.
BYD stands as a prominent leader in global electric vehicle sales and technology, offering competitively priced cars that pose a challenge to established automotive brands like Ford, General Motors, Toyota, and Nissan. This prospect has prompted concerns among automotive executives in the U.S., many of whom feel unprepared for the competition. Even Tesla CEO Elon Musk has expressed apprehension that Chinese automakers could outshine rivals without trade barriers in place.
The potential establishment of a Mexican plant by BYD has yet to be formally confirmed. Nonetheless, it is substantial evidence that the plan is highly probable, despite factors such as high interest rates, an unpredictable economy, and fluctuating EV demand in the U.S.
Furthermore, Mexico is steadily emerging as a major EV manufacturing hub in the Western Hemisphere. Several major automakers, including Kia, BMW, Stellantis, General Motors, and Ford, are either currently producing electric vehicles in Mexico or rapidly preparing for increased production, taking advantage of lower labor costs as they pursue more affordable electric cars.
The looming question is whether these automotive giants will be able to effectively fend off BYD’s inevitable foray into the U.S. market.