The US put 100% tariffs on Chinese cars to protect its market from a wave of cheap electric models. BYD will have a springboard in Mexico
BYD, the Chinese manufacturer that sold the most electric cars in 2023 (surpassing Tesla), is studying the opening of a factory in Mexico to produce its vehicles there.
Its initial objective is to open to the Mexican market. A possibility that the company has not admitted at the moment but remains open for the future would be to use it as a springboard to export to the United States, thus circumventing the 100% tariffs that the Biden administration has just imposed on Chinese electric cars.
Because it is important. BYD’s move shows how Chinese electric car manufacturers are looking for alternative ways to access the US market, a Gold for the industry: 333 million inhabitants and a GDP per capita which is close to $80,000.
Mexico, thanks to its integration with the US automobile industry through the USMCA (the free trade agreement between Mexico, the US and Canada), appears as an attractive export platform to avoid tariffs.
The details.
- BYD has carried out a feasibility study for the Mexican plant and is negotiating with local authorities aspects such as its location, according to advances. Nikkei.
- The Mexico plant would look towards the center and north of the continent. For the south, the Brazil plant is under development.
- Its exact location will be decided before the end of the year, it will be in the center of the country, it will open in two or three years and it will produce up to 150,000 cars a year.
- “Overseas production is indispensable for an international brand,” said a company spokesperson.
The company said in February that it had no plans to open a market in the United States. Will they maintain the decision when the plant starts operating?
The context. The offensive by Chinese electric car manufacturers is booming in Latin America. In Mexico, one in five cars sold in 2023 was Chinese. In Brazil, its sales have multiplied by eight this year.
The need for affordable options in countries whose income is far from that of the United States or several European nations is giving Chinese electric car manufacturers leverage there. Brazil and Mexico as examples… but also as a preview of an ambition that one day may be greater. The one that is north of Mexico.
With data from the World Bank:
The concern in the United States. Both American industry and politics fear the impact of an avalanche of cheap Chinese electric cars that disrupt a market full of large domestic manufacturers.
Elon Musk warned that these Chinese manufacturers will “demolish” their global rivals if they do not find trade barriers. It is an example of a widespread concern. Although Musk later clarified.
- Until 2023, sales from Chinese manufacturers in the United States have been non-existent. Neither electric nor combustion.
- Only some manufacturers from outside China have sold specific models made there, as Volvo does with the S90 or Buick with the Envision.
- This is reflected in the data of CarPro, which excludes manufacturers that do not declare their exact units sold (like Tesla).
Europe, another front. BYD is already accumulating activity and presence in Europe, but it is also taking steps to bring production there. It is building a factory in Hungary and plans to launch the Seagull, a utility vehicle, for about 20,000 euros. It can break the market.
BYD’s strategy of using Mexico as a new market does not mean that it cannot be used in the future as a bridge to the United States. And it reflects how protectionism can be “easily” bypassed. Biden’s tariffs, far from stopping these Chinese manufacturers, can end up diverting investments to neighboring countries and increasing their penetration into the local market through the back door.
It is a game that is not played on a single board.
Featured image | BYD
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