Hindered by tariffs, Chinese electric car makers have turned elsewhere to sell their high-tech vehicles. But as Mexico becomes a hotspot for Chinese electric vehicles, officials in Washington worry the country could be used as a “back door” into the U.S. market.
Last year, China was Mexico’s largest auto supplier, exporting $4.6 billion worth of vehicles to the country, according to the Mexican Economy Ministry. Even customers wary of electric vehicles are attracted by the affordable price tag. Tesla Rival BYD sells its Dolphin Mini in Mexico for about 398,800 pesos (about $21,300), slightly more than half the price of the cheapest Tesla.
“Chinese automakers are very aggressive in coming into the country,” said Juan Carlos Baker, Mexico’s former undersecretary of international trade. “They have good promotions. It’s a good product and the price is very reasonable. ”
Some Chinese electric vehicle makers, including BYD, have been seeking a further foothold in North America by exploring factory sites in the Mexican states of Durango, Jalisco and Nuevo León. Foreign investment will boost Mexico’s economic development. BYD claims that building a factory there will create about 10,000 jobs.
But U.S. officials worry it could be part of a larger strategy by Chinese automakers to circumvent trade restrictions and enter the U.S. market.
“Mexico is an attractive production platform, not just for Chinese companies but for other companies, in part because it has free trade access to the U.S. market,” said Scott Paul, president of the American Manufacturing Alliance. “ “It can do something called circumvention in trade terms.”
This free trade access is part of the United States-Mexico-Canada Agreement (USMCA), a revision of the North American Free Trade Agreement (NAFTA) that, starting in 2018, eliminated many restrictions on trade between North American countries. Tariffs on goods.
“We’ve seen China do this in other types of manufacturing, from appliances to auto parts to steel,” Paul said. “For more than a decade, China and the United States have been playing a game of trade policy tariffs. A high-stakes game of whack-a-mole.”
While meeting USMCA’s requirements is difficult, the potential scenario scares U.S. lawmakers and car companies.
Michael Dunne, chief executive of Dunne Insights, said: “If (Chinese electric vehicle manufacturers) are able to set up factories in Mexico, they will certainly pose an imminent threat to U.S. automakers, if for no other reason than because their costs will be lower.
In May, President Biden announced a 100% tariff on Chinese electric vehicles.
“We (the United States) are just starting to expand our electric vehicle industry, so it’s what I call a ‘baby industry,'” Paul said. “Like any baby, it is at a very delicate time in its development and must be vigorously protected.”
Experts say pressure from the United States puts Mexico in a difficult position in maintaining its important relationship with the United States without becoming too friendly to Chinese investment.
watch video Learn more about how Mexico is becoming a hotspot for Chinese auto companies and how the next administration may affect electric vehicle trade policy.
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