This story was originally Published in WIRED en Español and translated from Spanish.
China has established itself as Mexico’s main auto supplier, with exports expected to reach $4.6 billion in 2023, according to data from Mexico’s Economy Ministry.
Chinese automaker BYD surpassed Honda and Nissan to become the world’s seventh-largest automaker in sales during the April-June quarter, attributing the growth to rising demand for the company’s affordable electric vehicles, according to data from the automaker and research firm MarkLines.
The company’s new-vehicle sales rose 40% year-over-year to 980,000 units in the quarter — the same quarter that most major automakers, including Toyota and Volkswagen, saw sales decline. Most of BYD’s growth came from international sales, which nearly tripled to 105,000 units over the past year. BYD is currently considering building new car plants in three Mexican states: Durango, Jalisco and Nuevo Leon.
Foreign investment would boost Mexico’s economy; the company claims that building a factory there would create about 10,000 jobs. Tesla rival BYD sells its Dolphin Mini model in Mexico for about 398,800 pesos (about $21,300), just over half the price of the cheapest Tesla model.
Chinese electric vehicle makers, hindered by tariffs from selling to the U.S., have been looking to other markets to sell their high-tech vehicles. But as Mexico establishes itself as a major market for Chinese electric vehicles, officials in Washington worry it could be used as a “back door” to the U.S. market.
This tariff-free access is part of the United States-Mexico-Canada Agreement (T-MEC), an updated version of the North American Free Trade Agreement that eliminated tariffs on many products traded between North American countries as of 2018. Under the treaty, foreign auto companies that build vehicles in Canada or Mexico can export their products to the United States effectively tariff-free if they can prove that the materials they use are sourced locally.
According to official statistics, 20% of light vehicles sold in Mexico last year were imported from China, amounting to 273,592 units, a 50% increase compared to 2022. Currently, most of the cars imported from China are from Western brands that have established manufacturing plants in the country, including General Motors, Ford, Chrysler, BMW and Renault.
Mexico is the world’s second-largest market for Chinese-made cars after Russia, according to data from Linked Global Solutions, a company that specializes in business between China and Latin American countries.
Trade War Against China
Both the United States and the European Union are escalating their trade war with China, focusing on auto and semiconductor chip production, which are under investigation for predatory practices, tariffs and restrictions. This new geopolitical strategy has Western companies looking for alternatives to relocating factories outside of China, a trend known as “nearshoring.”
The United States, concerned about the impact on domestic automakers, has raised tariffs on Chinese-made electric vehicles to 100%. Canada is also considering imposing its own tariffs on Chinese-made cars.
