BYD, the electric vehicle (EV) manufacturer backed by Warren Buffett, is making waves on the international stage. After recently surpassing Tesla to become the world’s leading producer of battery electric vehicles, the Chinese EV giant is setting its sights on global domination. It’s already announced the establishment of factories in Thailand, Indonesia, Brazil, and Hungary. Now, there are whispers of a potential new plant in Mexico, a move that could potentially provide a gateway into the lucrative U.S. market.
BYD’s Global Expansion
Zhou Zou, BYD Mexico manager, disclosed to Nikkei Asia that the company is contemplating setting up a manufacturing plant in Mexico. Not revealing any specific locations, Zou explained that international auto brands require overseas production, and Mexico represents an untapped market with immense potential. The company is currently in negotiations with both national and local governments regarding the possible site for the new plant.
BYD is not the first Chinese automaker to consider Mexico for expansion. JAC Group and MG Motor, both owned by Shanghai-based SAIC, already have operations in the country. Furthermore, SAIC is rumored to be planning to invest between $1.5 billion and $2 billion to construct a factory in Mexico. Chery, another Chinese company, is also eager to increase production in Mexico.
Outside of China, BYD has already announced significant investment in several new facilities. In Asia, the company is investing $1.3 billion to establish an EV factory in Indonesia and is expected to commence production in Thailand later this year. Additionally, Hungary and Brazil have been selected as manufacturing bases to cater to the European and Latin American markets respectively.
The Appeal of Mexico
So, why Mexico? The answer lies in two key factors. Firstly, Chinese-made vehicles are becoming increasingly popular among Mexican consumers, with cars from China making up roughly one-fifth of the Mexican car market. In fact, in 2023, Mexico was the second-most-favored destination for Chinese auto exports, second only to Russia.
The second factor revolves around the potential for lower export costs for selling Mexico-made BYD vehicles in the U.S. market. Chinese EVs are currently subject to a 25% tariff in the U.S., in addition to a 2.5% tariff on imported cars. Furthermore, the Biden administration’s new rules deny tax credits to EVs that use battery components sourced from China.
However, cars manufactured in Mexico can be exported to the U.S. without any tariffs, thanks to the U.S.-Mexico-Canada Agreement. This is as long as three-quarters of the car’s parts were produced in North America. In 2023, Mexico overtook China as the leading source of imports into the U.S. for the first time in over two decades.
Looking Ahead
BYD’s potential move into Mexico is not just about tapping into a new market. It’s a strategic move that could significantly lower export costs and open up the lucrative U.S. market. It’s a reminder that in the fast-paced world of EVs, staying ahead of the game requires thinking globally and acting strategically. As the EV market continues to heat up, BYD’s global moves will be one to watch.
Reuters has also reported on BYD’s aggressive global expansion, highlighting the company’s strategic moves to secure its position as a dominant player in the EV market.
