After BYD began negotiations with Mexico in 2023, the United States began to pressure the Mexican government to close the local electric car market to the Chinese. From the US perspective, Chinese competitors such as BYD are reportedly trying to subtly use the US-Mexico-Canada Agreement (NAFTA) to gain a privileged “door of entry” into the US market. In March 2024, former US president and Republican presidential candidate Trump said at a rally that if he returned to the White House, he would impose 100% tariffs on cars made by Chinese companies in Mexico.
Chinese company BYD will no longer invest in Mexico to set up electric vehicle factories.
The Mexican government, under pressure from the U.S., has had to keep its distance from BYD to stop its investment in car factories and provide cheap public land or tax breaks.
BYD officially entered the Mexican market in March 2023, launching mainly pure electric vehicles and plug-in hybrid models. At the same time, the management team began looking for suitable locations in the country to invest in a factory and expand sales of the company's products through localized production.
BYD is one of the many Chinese car companies with a strong focus on the Mexican market. In recent years, Mexico's demand for Chinese cars has gradually increased. Statistics from the General Administration of Customs of China 2023 show that Mexico is the second largest destination country for Chinese car exports after Russia.
About 20 Chinese car companies already sell cars in Mexico, and Chinese cars account for one-third of the number of brands in the Mexican car market.
In this context, more and more Chinese car companies are looking to invest in factories in Mexico. In 2017, BAIC Foton opened its first factory in Mexico in Jalisco. At this stage, BYD, SAIC MG, Chery Automobile and other Chinese automotive companies are following suit, hoping to invest and open factories in Mexico.
Source: Zheshang Securities Research Institute
Mexico is an attractive investment market for the automotive industry and is also the second largest economy in Latin America, with a GDP of $1.46 trillion and a GDP per capita of $11,484.5 in 2022.
The country has a good foundation for the automotive industry and a perfect automotive supply chain, rich human resources and strong market demand, and is a hot investment ground in the eyes of large global automotive companies.
For Chinese automotive companies, expanding automobile exports and manufacturing cooperation with Mexico is an inevitable choice to improve product competitiveness and expand market share.
The main impeding factor preventing BYD from investing and establishing a factory in Mexico is the United States.
After BYD began negotiations with Mexico in 2023, the United States began to put pressure on the Mexican government to close the Mexican electric car market to the Chinese.
From the US perspective, Chinese competitors such as BYD - which invest heavily in Mexico - are allegedly trying to subtly use the US-Mexico-Canada Agreement (NAFTA) to gain a privileged "door of entry" into the US market.
US lobbying organizations such as the "American Manufacturing Alliance" continue to argue that Chinese cars and parts threaten the survival of US automakers and ask the Biden administration to intervene to protect national security.
In March 2024, former US president and Republican presidential candidate Trump said at a rally that if he returned to the White House, he would impose 100% tariffs on cars made by Chinese companies in Mexico.
Mexico is an important ally of the US.
In fact, the United States is Mexico's largest trading partner. According to Mexican statistics, Mexican-U.S. trade rhas reached $721 billion in 2023, and 80.9 percent of the country's exports and 38.9 percent of its imports are tied to the U.S. market.
The United States is also the most important source of investment for Mexico: between January 1999 and December 2023, the Central American country received a cumulative total of $318 billion in foreign direct investment from the United States.
Mexico receives substantial remittances from the United States each year, the amount of which has continued to grow over the past decade, from $23.5 billion (2014) to $60.9 billion (2023).
For Mexico, therefore, the U.S.-Mexico-Canada NAFTA free trade agreement (under renegotiation) is of critical importance to its economy.
BYD executives have repeatedly stated that BYD was not the Chinese giant's intention to use Mexico to enter the United States and that the establishment of a factory in Mexico was primarily to meet the needs of the country's market, for which BYD has sought to establish factories in central and southern Mexico (rather than in the north near the United States).
Media reports indicate that BYD sent a delegation to Jalisco, a central Mexican state, in March 2024 to propose to the local government the use of a $600 million investment fund.
For the United States, Latin America (LAC) also continues to be important to its national security.
During various visits to Latin America, officials from the Trump and Biden administrations accused China of a predatory economy, creating dependencies of various types in countries where Beijing extended its hegemonic interests.
In 2020, Mike Pompeo, then US Secretary of State, made similar remarks during his visit to Suriname, triggering a public denial from the Chinese embassy.
In 2021, I'll be here in America in a heartbeat, visit you in Ecuador, have fun in China.
In 2022, in an interview with the Chilean newspaper Courier, Blinken said that China-Chile cooperation "endangers Chilean national security".
In 2023, Laura Richardson, commander of US Southern Command, said China's infrastructure projects in South America "threaten US national security".
Therefore, the United States is asking Mexico not to provide land, water, electricity and tax incentives to BYD, also hoping to exclude Chinese-made cars from the operational scope of the U.S.-Mexico-Canada Agreement (NAFTA).
The United States also exerted legitimate pressure to prevent the Shaanxi Coal Industry Chemical Group from implementing a Chinese investment project in Argentina.
In 2022, the Chinese group had signed a memorandum of understanding (MOU) with the Argentine provincial government of Tierra del Fuego for the construction of an energy and chemical project.
Specifically, according to the memorandum, Shaanxi Coal Chemical was to invest in the construction of a multifunctional port terminal, a power plant, and a chemical production center.
The U.S., however, discovered that the entire project was aimed at secretly establishing a Chinese "military base" in the strategic area connecting the Pacific and Atlantic oceans and neighboring Antarctica.
Both the "Growth of the Americas" initiative, launched by the Trump administration, and the "Partnership for Economic Prosperity in the Americas" initiative, pursued by the Biden administration, are tools by which the United States seeks to combat China's dangerous predatory expansionism in the LAC.
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