Chinese electric vehicle maker BYD is hunting for a factory location in Mexico to increase its share of the local market, BYD Americas CEO Stella Li told Reuters. The company expects to choose a location which would be able to produce 150,000 cars annually by the year end. The carmaker is looking to boost its global sales volume and make a mark in the global EV industry. Earlier this year, it outpaced US giant Tesla to become the most valuable EV maker globally in the fourth quarter of 2023.
The company’s push into Mexico foreshadows a competitive threat to the local automakers as well as to companies operating in the US market. Last month, a US manufacturing advocacy group, the Alliance for American Manufacturing warned that low-cost Chinese cars and parts could threated the viability of auto companies in the US. The group urged the government to block import of low-cost Chinese autos and parts from Mexico to prevent an “extinction-level event” for the US auto sector.
As per the US-Mexico-Canada trade agreement, vehicles and parts produced in Mexico can qualify for preferential treatment as well as qualify for a USD 7,500 electric vehicle (EV) tax credit. By manufacturing parts in Mexico, the China-headquartered companies are reaping benefits of this trade deal.
However, Li told Reuters that the BYD Mexico is solely geared at local sales as the company is scouting for factory sites in central and southern areas rather than northern Mexico near the US border. The reason cited for this decision is that transportation costs to reach consumers would be expensive otherwise. “Our plan is to build the facility for the Mexican market, not for the export market,” she said, adding that Mexican officials were receptive of the company’s plans.
As per analysts, Chinese automakers have been rapidly improving their vehicles and even moving faster than global rivals in some areas, such as infotainment systems and autonomous driving.
BYD is one of the most aggressive Chinese players, posing immense competition to its global rivals, especially Tesla. The company is expected to bring massive price cuts to Mexico, just like it did in its home market. The cost advantages come from the company’s early investment in EV technology and a high degree of vertical integration.