Chinese manufacturer BYD (Build Your Dreams) is considering building an assembly plant in Mexico. This is according to Japanese daily Nikkei. The manufacturer is obviously keen to establish itself in this region to be able to attack the American market more easily.
Recall that vehicles built in China are subject to high tariffs (27.5 percent), making it impossible to market them in the U.S. Manufacturing vehicles in Mexico would let it bypass those tariffs.
BYD is renowned for its more affordable models. The company might not have much of a presence in North America, but it has overtaken Tesla in terms of EV sales. Those sales are, of course, concentrated in China.
According to Nikkei, BYD is studying the possibility of setting up a plant in Mexico and is negotiating with authorities there on the terms, conditions and location of an eventual factory.
BYD has global ambitions, and Mexico represents a golden opportunity because of its natural integration with the American market. Many manufacturers have plants there, including General Motors and Volkswagen.
“Overseas production is essential for an international brand,” Zhou Zou, Country Manager of BYD Mexico, told Nikkei.
Among the major American automakers, there's an air of mistrust. Tesla's head honcho, Elon Musk, has predictably warned that Chinese electric vehicles could derail Tesla’s own ambitions. Last month, he went so far as to predict that Chinese automakers would “demolish” their global rivals if trade barriers were to fall.
His view is shared by many, including the industry group Alliance of Automotive Innovation. That leading trade group has said “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 U.S. auto sector.”
It’s a warning not to be taken lightly.
In South America, BYD plans to spend the equivalent of $1 billion CAD on a new industrial complex in north-east Brazil. The three-plant complex is going up on land once occupied by Ford (until 2021). For irony, that's hard to beat this.
Many have been wondering when we'll see cheaper Chinese EVs. The answer could come soon.