Chinese Carmakers Want Factories In Mexico. That Can Mean Only One Thing

The question of Chinese cars reaching the United States is no longer an if, but a when. The country's auto industry, which Tesla CEO Elon Musk fears could "demolish" western rivals, is rapidly expanding outside its home market and strengthening footholds in Europe and Australia. Now, multiple Chinese automakers have eyes on Mexico, and are exploring—or have already built—factories there. Doing so puts them not just on the doorstep of the U.S. market, but could fully open the door to them.

Foremost among China's contenders is BYD, which sold more EVs in Q4 2023 than Tesla did. Nikkei Asia reports the company is conducting a feasibility study and negotiating with the Mexican government for construction of a factory, for which several potential sites have been identified. That puts BYD on similar ground to SAIC, which Financial Times reports also seeks a Mexico factory for its repatriated MG brand. The competing Chery is also pursuing a plant according to Fortune. JAC meanwhile already has a plant in Mexico, though its planned 2019 U.S. market entry never panned out.

Mexican manufacturing is of great importance to carmakers from across the world due to its cheap labor and access to the U.S. market. (The fact that the industry is consolidating there is only a bonus.) Mexico is a member of the United States-Mexico-Canada Agreement, the NAFTA successor that lowers trade barriers between North America's three biggest economies. It allows vehicles like the Mexican-made Ford Maverick to be exported to the U.S. without incurring the 25-percent "Chicken Tax" on light trucks, which shuts out foreign competition like the Chevrolet Montana, Japanese kei trucks, and a range of cheap Chinese alternatives. Some of them are even quite stylish.