Yang Yunfei

1017800664@qq.com

BYD Co., which overtook Tesla Inc. to become the world’s biggest electric car company in the final quarter of 2023, now needs to navigate new roads to maintain momentum after conquering its home market by ending Volkswagen AG’s 15-year-run as the top car seller in China.

The Shenzhen-based firm, which sold 3 million cars overall in 2023, is accelerating its go-global drive. With a footprint in more than 70 countries and production facilities under construction in Thailand, Hungary and Brazil, BYD has now set its sights on Mexico as its quest for global expansion turns toward North America.

Mexican market

A BYD delegation visited the Mexican state of Jalisco last week as the firm is searching for a potential site for an EV plant in the country.

Executives from BYD met with Jalisco state officials and Chinese suppliers already present in Jalisco, Bloomberg reported Saturday.

Sales of Chinese cars jumped 63% year on year to a new record of 129,329 units last year in Mexico, according to the Mexican Association of Automobile Distributors. With 11 Chinese brands now sold in the country, Chinese automakers claimed 19.5% of Mexico’s market in 2023.

Hefty US duties

Chinese-made electric vehicles are currently subject to a 27.5% tariff in the United States, the world’s second-largest auto market after China, and that has prevented Chinese carmakers from making significant inroads into what has been one of the most sought-after markets in the world for global automakers. BYD, for example, does not sell any of its passenger cars in the United States due to the steep U.S. import tariff.

Under the United States-Mexico-Canada Agreement, which went into force July 2020 and replaced the North America Free Trade Agreement, any passenger vehicle that is made with 75% of parts sourced from within the three countries can avoid import tariffs.

Hoping to gain a valuable foothold in the region, some Chinese car and auto parts makers are building manufacturing facilities in Mexico. These operations would allow Chinese companies to manufacture products and then export them into North America and Latin America. Anhui Jianghuai Automobile Group Corp. is currently the only Chinese car company with an assembly plant in Mexico.

Hunting for

production site

BYD has already operated in Mexico for 10 years. It already sells trucks and forklifts to private companies, as well as vehicles to be used as taxis in Mexico’s public transportation fleet.

It has six dealerships in Mexico and plans to have 50 (with a presence in all of Mexico’s 32 states) by the end of 2024.

The Berkshire Hathaway-backed giant has long been planning a manufacturing presence in Mexico.

In September, Stella Li, BYD executive vice president and BYD Americas CEO, told Mexican news outlet El Sol de Mexico that the company was considering building a factory in the country, though it would depend on market demand.

BYD executives met ministers from at least four Mexican states, including Edomex and Yucatan, in November last year at a reception in Mexico City held to discuss the electric vehicle factory.

At a launch event for BYD’s Dolphin Mini electric vehicle in Mexico City earlier this month, Li told reporters that the firm is looking for a location in Mexico to set up a factory that would have a production capacity of 150,000 cars annually.

Li said that BYD has been meeting with officials from different Mexican states and her team is busy evaluating site candidates in a 200-kilometer radius around Mexico City, with a decision slated for the latter half of this year.

The cost of building a plant in Mexico would likely be around US$600 million, which is similar to what BYD paid for its EV facility in Brazil, Bloomberg quoted a person close to the situation as saying in its Saturday report.

BYD said Wednesday last week that it has begun construction on its manufacturing complex in Brazil, which is expected to be become operational by the end of this year or in early 2025.

The Brazil complex, with an estimated annual production capacity of 150,000 units per year in the first phase, will initially produce models including the Dolphin hatchback, Dolphin Mini, Song Plus SUV, and Yuan Plus crossover.

Li explained that this complex is part of the brand’s globalization strategy, which, in addition to Asia and Europe, also includes Mexico.

Possible US

trade curbs

As China’s ultra-competitive EV manufacturers expand deeper into Mexico with their high-tech, affordable offerings, political headwinds are mounting for them in the United States.

A recent report from the Alliance for American Manufacturing urged the Biden administration to block imports of Chinese automakers’ products that are made in Mexico, arguing that they could threaten the viability of American car companies.

“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 U.S. industry group said in its Feb. 23 report.

Republican U.S. Senator Josh Hawley introduced legislation Feb. 28 to hike import tariffs to 125% on all imported Chinese autos from the current 27.5%. Hawley’s bill also seeks to apply a base tariff rate of 100% to vehicles assembled in Mexico by Chinese automakers.

However, Li said her company had little interest in targeting U.S. consumers as BYD’s upcoming factory in Mexico would first and foremost serve local customers looking to purchase an EV or plug-in hybrid.

“We’re not planning to come to the United States,” she said.

In the U.S. now, BYD is a supplier of electric buses, trucks, and forklifts.

The company reports that more than 1,000 electric buses are “on the road or in production in the U.S.” The buses, built in Lancaster, California, have more than 70% U.S. content.

China has contributed to global low-carbon transformation efforts.

One out of every three vehicles exported by the country is an EV, Mao Ning, a spokesperson for China’s Ministry of Foreign Affairs, said during a regular press conference Feb. 20 in response to the United States trying to limit EV imports from China.

The protectionist measures employed by “related countries” are “dragging down progress and prosperity in the world,” she said.