Chinese EV Makers Plan Factories in Mexico, Worrying US Automakers
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In this Thursday, April 20, 2017 photo, the $1.5million NIO EP9 is displayed at the Shanghai auto show. NIO is part of a wave of fledgling automakers - all backed at least in part by Chinese investors - that are propelling the electric vehicle industry's latest trend: ultra-high-performance cars. (AP Photo/Ng Han Guan)
Chinese electric vehicle (EV) manufacturers are planning to establish factories in Mexico, raising concerns among US automakers. This move could potentially be seen as a “back door” for Chinese companies to undercut the Big 3 US carmakers – General Motors, Ford, and Chrysler.
The Mexican market has seen a significant increase in sales of affordable Chinese-made EVs, which has led to a surge in imports of Chinese cars, both EVs and traditional ones. This trend has been particularly noticeable over the past three years, with Chinese EV exports jumping by 851%.
However, the US has imposed tariffs on Chinese EV makers, making it difficult for them to compete with domestic and friendly-country imports. As a result, Chinese EV manufacturers are now looking to Mexico as an alternative market.
Mexico has a free trade agreement with the US and Canada (USMCA), which allows for easier trade between the countries. This agreement could potentially provide Chinese EV makers with a competitive advantage, as they would be able to export their vehicles to the US without facing the same tariffs that they currently face.
Some of the Chinese EV manufacturers that are considering establishing factories in Mexico include BYD, Chery, and MG. BYD, in particular, is a significant player in the EV market, as it is backed by Warren Buffett’s Berkshire Hathaway and has a strong supply chain for EV batteries.
In response to this development, the US government has recently released new rules that make it more difficult for vehicles with battery components made by foreign entities of concern (such as China, Russia, Iran, or North Korea) to qualify for a $7,500 tax break granted to EV buyers under the Inflation Reduction Act.
This move by the US government aims to protect the domestic EV supply chain and ensure that only vehicles made in the US or imported from friendly countries can benefit from the tax break.
In conclusion, the decision by Chinese EV manufacturers to establish factories in Mexico has raised concerns among US automakers, as it could potentially lead to increased competition and undercutting of the Big 3 US carmakers. The US government has responded by implementing new rules to protect the domestic EV supply chain, but it remains to be seen how effective these measures will be in the long run.
