BYD, the foremost manufacturer of electric vehicles (EVs) in China, purportedly entertains the notion of erecting a fresh EV manufacturing facility in Mexico, with the aim of challenging Tesla’s dominance in the North American automotive market.
As per sources cited by the Financial Times, BYD engages in discussions with Mexican authorities concerning a prospective location for the factory, an endeavor anticipated to incur costs ranging between $1.5 billion to $2 billion. The facility, if realized, would be tasked with the production of EVs belonging to BYD’s Ocean series, including the Seal sedan and the Dolphin hatchback, both of which vie directly with Tesla’s Model 3.
BYD does not stand alone in its strategic interest in Mexico. Other prominent entities in the Chinese EV sector, such as MG and Chery, also harbor intentions to introduce their electric vehicles to the Mexican market in the upcoming year. MG, in particular, sets its sights on retailing up to 30,000 units by the year 2024.
Mexico boasts several appealing attributes for EV manufacturers, notably its cost-effective labor force, a free-trade agreement with the United States, and a burgeoning demand for eco-friendly transportation solutions. Additionally, as the largest trading partner of the US, Mexico’s proximity could potentially facilitate the entry of Chinese EVs into the American market, despite the prevailing trade restrictions and regulatory hurdles imposed by Washington.
Recent regulatory changes in the US seek to impose stricter criteria for EVs utilizing components sourced from China to qualify for tax incentives. These measures are part of broader initiatives aimed at safeguarding the domestic EV sector and curtailing China’s influence within the global EV supply chain. Notably, China commands a dominant position in EV battery production, a critical determinant of both cost and performance in the EV market.
The prospect of Chinese EV manufacturers expanding into Mexico has elicited apprehension among US officials, who reportedly conveyed their concerns to their Mexican counterparts. Some legislators in the US have sounded alarms regarding the potential exploitation of Mexico as a conduit for Chinese EVs to infiltrate the American market, calling for more robust trade policies to forestall such scenarios.
Backed by the considerable investment of billionaire Warren Buffett, BYD has been steadily narrowing the sales gap with Tesla on the global stage. In the third quarter of the current year, BYD reported sales figures of 431,603 EVs, trailing Tesla by a mere 3,500 units. Furthermore, BYD has recently introduced two new EV SUV models, namely the Sea Lion 07 and the Song L, poised to bolster its sales performance in the ensuing quarter.
While BYD already maintains a presence in the US market, primarily through the production of electric buses, trucks, batteries, and solar panels, it has yet to venture into the passenger car segment, an arena presently dominated by Tesla. The prospective establishment of a manufacturing facility in Mexico could serve as a pivotal juncture in BYD’s trajectory towards expanding its footprint within the US automotive sector.
Notably, BYD, MG, and Chery refrained from offering immediate commentary in response to inquiries from Business Insider, citing the timing of the requests made outside customary business hours.