A US manufacturing advocacy group has urged the government to block the import of low-cost Chinese autos and parts from Mexico. They have warned that this could threaten the viability of American car companies and stir up an extinction level event for the sector. “The introduction of cheap Chinese autos – which are so inexpensive because they are backed with the power and funding of the Chinese government – to the American market could end up being an extinction-level event for the US auto sector,” the Alliance for American Manufacturing said in a report, Reuters reported.
The group has urged the government to prevent automobiles and parts manufactured in Mexico by companies headquartered in China and benefiting from a North American free trade agreement. “The commercial backdoor left open to Chinese auto imports should be shut before it causes mass plant closures and job losses in the United States,” the report said.
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.
In response to the US advocacy group’s statements, the Chinese embassy in Washington said that the latter’s automobile exports “reflect the high-quality development and strong innovation of China’s manufacturing industry… The leapfrog development of China’s auto industry has provided cost-effective products with high quality to the world.”
The concern has gained more prominence after reports of Chinese manufacturer BYD’s plans to set up an EV factory in Mexico. The automaker, which is known for its cheaper models and a more varied lineup, recently overtook its biggest rival, Tesla to become the world’s top EV maker by sales.
Following the fresh developments, a bipartisan group of US lawmakers has urged the Biden administration to hike tariffs on Chinese-made vehicles and find out ways to prevent Chinese companies from exporting to the US from Mexico. In December, the US Treasury issued guidelines on the USD 7,500 EV tax credit aimed at weaning the US EV supply chain away from China.