The U.S. government is getting worried about all the incentives Mexico’s given to Chinese automakers.
Mexico is reportedly putting meetings with Chinese carmakers on hold in an effort to avoid angering the United States, one of its major partners within the free trade zone outlined by the United States-Mexico-Canada Agreement (USMCA). The worry among American politicians is that China wants to circumvent high import tariffs by setting up shop in Mexico, thereby gaining cheap entry to the U.S. market. Due to this pressure from American officials who are suddenly worried about Chinese manufacturing in Mexico, ongoing talks of further investment have halted.
Back in January, Mexican government officials reportedly told personnel from Chinese EV manufacturing juggernaut BYD that it wouldn’t be granting any further land or tax incentives to Chinese automakers, like it’d done in the past, and that future meetings with such firms were paused for the time being, according to sources in contact with Reuters.
The Office of the United States Trade Representative is reportedly behind Mexico’s move to pause talks, and while the USTR refuses to confirm if the pressure on Mexico is coming from them, they tell Reuters that the USMCA is not supposed to “provide a back door to China and others who may be seeking to access our market without paying…tariffs” The Biden administration has also said it “will not let Chinese automakers flood the market with vehicles that pose a threat to national security.”
Mexico has long been a manufacturing hub for American automakers and suppliers, including GM, Ford and Stellantis. The list of assembly plants in the republica includes factories that belong to Japanese and German automakers as well, and now that Chinese carmakers are adding their names to the roster, the U.S. government is getting more involved. China had been making large investments into the automotive sector in Mexico leading up to this point, with an eye towards planting its flag in a country that neighbors the U.S. and, more importantly, plays such a vital role in supplying the U.S. car market.
BYD’s upcoming electrified pickup truck, rumored to be named “Shark,” shown camouflaged in Mexico. BYD
It looks like the Biden administration is now attempting to influence Mexico’s decision to foster a closer relationship with the Chinese. The United States could succeed in that endeavor, because the USMCA is up for revision in 2026. Mexican officials worry that the U.S. could propose unfavorable trade terms in the future if Mexico allows the Chinese to become a key player in North American EV production.
Despite this pressure, Chinese automakers have already made inroads into the Mexican market. Some 20 Chinese brands, including BYD, JAC, MG, and Chirey (Chery,) are hard at work conquering hearts and minds in America’s southern neighbor. They’re doing it with cheap cars and proposals to establish future EV production in the country, including battery plants. Chinese cars now “constitute about a third of the total brand offerings in Mexico,” per Reuters, which marks a shift away from legacy marques.
In the past, Volkswagen and Toyota were among the most popular and highly esteemed brands in Mexico. This was partially due to their heavy manufacturing presence in various Mexican states. But it’s hard to beat a cheap personal vehicle, and Mexican buyers are flocking to alternatives from BYD and MG, among others. Whereas cars like the Volkswagen Jetta were once a favorite of Mexican families, sedans and SUVs like the MG MG5 and Chirey Tiggo 7 are now becoming just as common.
Even if those cars will almost certainly never make it to the U.S., the Chinese could still tap into the U.S. market through production partnerships. BYD, for example, has a history of working with Tesla in China, supplying the American EV maker with batteries. It’s possible that the Chinese could do the same with other automakers and contribute to U.S.-bound EVs with batteries made in Mexico, which would avoid tariffs. This could be why the U.S. is now jealously guarding its interests in Mexico, and warning its neighbor to consider its new relationships.
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