Hi, and welcome to Best in Tesla.
In the global race for electric vehicle dominance, China has strategically
positioned itself not just as a leader in production, but also in market expansion.
One of its most intriguing moves is the focus on Mexico, a country
that serves as a geographical and economic bridge to the lucrative U.
S.
car market.
Here's how China's EV strategy is unfolding south of the US border.
And yes, Ford and GM should take notice.
So let's check it all out.
Let's dive right in.
So Mexico seems to be the new frontier for Chinese EV manufacturers, for
some of the same reasons that Tesla also chose Mexico as the place for
their next generation car factory.
Mexico has rapidly become the top top importer of Chinese vehicles
with imports reaching a staggering 4.
6 billion.
Last year, this surge is not a coincidence, but part of China's
broader plan to leverage Mexico's manufacturing capabilities and
its adventurous trade agreement.
The US Mexico Canada Agreement, or US MGA plays a pivoted role here,
allowing vehicle manufacturer in Mexico to potentially enter the US
market duty free, provided they meet certain local content requirements.
CNBC made a nice piece about this topic, so let's try to take a look
at some of the highlights here.
The electric vehicle revolution shaped by trade tensions.
Concern around competition from China is weighing on American
lawmakers and auto companies.
China's growing global auto dominance has some lawmakers on edge.
At the center of that conversation is a country known for its beaches and
its ideal trade proximity to the U.
S., Mexico.
The Chinese have targeted Mexico as a prime export market.
Across the U.
S.
border, the country has seen an influx of Chinese made new energy cars.
The Chinese automakers came to the country.
And now some Chinese automakers, including Tesla rival BYD, are announcing
plans to build factories in Mexico.
But for the U.
S., there's concern this might be a part of a larger strategy.
The Chinese would love to access the U.
S.
market because there were profits to be made in the U.
S.
market.
Getting in directly to the United States market is tricky because of
the tariffs and other obstacles.
And so I think many of these Chinese automakers look at Mexico as a backdoor
in the United States of America.
Washington has built a wall to block cheap exports using tariffs, but experts
say these may only be buying time.
It's the Chinese version of a Godzilla.
Get ready, this thing's coming and it's going to shake up the world.
Yes, the U.
S.
government has only delayed the inevitable.
The Chinese are coming, and they will still come fast, as they
need to find new markets to ship all their EVs to, and the U.
S.
is the second biggest auto market in America.
The world and a very profitable one as well.
So of course the Chinese will do all they can to enter this
market one way or another.
Chinese automakers are winning over millions of drivers around the world.
Last year, China produced over half of all electric vehicles sold worldwide.
Supported by government subsidies and lagging domestic demand.
Chinese AV makers have had to look overseas to sell their cars.
Last year, China overtook Japan to become the world's largest auto exporter.
sending 4.
9 million cars overseas and 1.
2 million of those cars were electric.
China has built up such automotive production capacity that it can't possibly
sell all of those vehicles in China, so it has to look to other markets.
Almost overnight, Mexico has become a major market.
Chinese automakers are, um, becoming more international.
So Mexico fits in this broader story of Chinese companies
trying to access new markets.
In 2023, the country was the leading importer of cars made in China.
Importing a total of 4.
6 billion worth of Chinese vehicles.
That's compared to 4.
4 billion from U.
S.
based companies.
So, Mexico last year bought more cars from China than its neighboring country, the U.
S.
So not only are the Chinese coming for the U.
S.
market, but are also stealing market share in the surrounding countries.
So I hope people can see the threat that Chinese automakers are to
the Western legacy automakers.
First, they overtook Japan as the leading export country for cars, and
now also export more cars to Mexico than the US automakers are able to do.
And of course, the expectation is that the Chinese EVs will make
up about 25 percent of all EVs sold in Europe this year as well.
They are quickly taking over on a global scale.
And Mexican consumers are quickly embracing Chinese made EVs.
Last year, 1 in 10 vehicles sold in Mexico were made by a Chinese company,
outpacing every other foreign country.
Even consumers weary of electric cars are drawn to Chinese EVs
for their affordable price tags.
BYD sells its Dolphin Mini in Mexico for around 398, 000 pesos.
That's around 21, 000, a little less than half the price of the cheapest Tesla.
The Chinese automakers came to the country very aggressively.
They have, to be honest, very good promotions.
Chinese cars, it's a good product that sells at a very reasonable price.
Experts say China's entrance to Mexico follows a broader strategy to
target emerging economies, which can be friendlier to foreign investment.
Latin America, parts of Asia, and the Middle East have all seen influxes
of Chinese made cars in recent years.
Unlike the developed economies, the emerging ones are less
complicated, less complex, in terms of regulations, and I'm talking
about safety standards or emissions.
Chinese car makers, if you look at the figures, they are gaining
traction faster in those economies than in the developed economies.
For example, Latin America, which is the current government in Brazil,
was, was, uh, quite enthusiastic about welcoming BYD's newest investment.
They now have a factory in Brazil that they're building.
Similarly, I think the biggest recipient of Chinese, um, investment in terms of new
electric vehicle factories is Thailand.
So usually these companies go where they're welcome.
Earlier this year, multiple Chinese automakers have announced plans
to open EV factories in Mexico.
Mexican states Durango, Jalisco, and Nuevo Leon have even offered
incentives to Chinese automakers to open manufacturing operations.
These include tax breaks, free land, and help hiring labor.
And this is, of course, the same reasons as why Tesla is also going to
build their next Gigafactory in Mexico.
To get access to the U.
S.
market without any taxes on their cars and cheap labor, of course.
And they, of course, also got some great deals from Mexico to
build a factory in the country.
Experts say this process of nearshoring, or bringing production closer to the final
target market, would benefit both parties.
For Mexico, the factories would bring jobs and limit the cost
of importing so many cars.
For Chinese companies, they could increase a foothold in the North American market.
But this is what has Washington worried.
Mexico is already a manufacturing powerhouse, serving as a hub for
many international auto brands.
Tesla has been exploring manufacturing sites in the country, although
plans are on hold for now.
This started in the mid 90s, with the signing of the North America
Free Trade Agreement, or NAFTA, which removed tariffs on many goods traded
between the US, Mexico, and Canada.
The big winners were auto companies.
The most recent iteration of the trade agreement was enacted
by Donald Trump in 2018.
It's called the U.
S.
Mexico Canada Agreement, or the USMCA.
First, the Germans gave, you know, all the, uh, BMW, and then the Japanese
gave Toyota, Honda, and then lastly the Koreans gave Hyundai, Kia, and others.
Some people now are arguing that the next way to It's going to
be driven by Chinese companies.
Mexico is an attractive production platform, uh, not only for Chinese
companies, but for other companies as well, in part because of that free trade
access that it has to the American market.
And it can do something that in trade terms is called circumvention.
In order to sell its overcapacity of cars, China needs to access
wealthier markets like the U.
S.
and Europe.
But so far in the U.
S., they've been blocked by tariffs and political tension.
To get around these barriers, China could take advantage of the USMCA.
It would look something like this.
If a Chinese auto company were to set up operations in Mexico or
Canada, and prove that the majority of materials that they use to build
their cars are sourced locally, they could export their cars into the U.
S.
market virtually duty free.
For EV production, Chinese automakers have narrowed in on Mexico for
its manufacturing infrastructure, low labor costs, and most
importantly, proximity to the U.
S.
It's a strategy that Chinese companies have used before.
For more than a decade now, China and the United States have been playing
a high stakes game of whack a mole when it comes to trade policy tariffs
and trying to get into the market.
And we've seen China do this in other types of manufacturing, from
appliances to auto parts to steel.
And so autos is the next logical sector for China to
scale up investment in Mexico.
It's a potential scenario that terrifies U.
S.
officials and automakers.
If they're able to do that, set up in Mexico to manufacture in the United
States, they would definitely pose an imminent threat to American auto makers.
If for no other reason, because their cost would be lower.
Really the most lucrative market in the world, in a lot
of ways, is the American market.
We're only 5 percent of the world's population, but we consume 20
percent of the world's goods.
We are great at consumption, and Americans like a deal.
And if they were to see, A Chinese made EV that comes in at 000.
They're very price motivated and these things could potentially wipe
out a lot of the U S competition.
Yes, GM has said themself that they will not be able to make
an EV in the 30 to $40,000 price range, profitable this decade.
And Volkswagen has put out their Trinity platform to 2032, which should enable
Volkswagen to make more affordable EVs.
And Ford has just announced they will be pushing their next
generation platform out to 2027.
So basically, no one of the old legacy automakers have something come.
Competitive on cost ready within this decade, especially something that can
compete with a Chinese EV for about 20 to $25,000 in the US For now, none of
the major Chinese automakers have begun building factories in Mexico and many have
stalled plans citing tension with the us.
The sentiment among the Chinese automakers I talked to is that things are so tense
between the US and China right now.
That now is not the right time to come and invest in the us Not the right time
politically, just too much tension.
Mexican government officials have likewise paused incentives to Chinese automakers.
BYD has publicly walked back intentions to enter the US market,
least for now, they're not ready.
But then for BYD, we are ready.
The U-S-M-C-A is set to be reviewed in 2026.
And who leads that discussion from the White House remains up in the air.
At the Republican National Convention in July, Donald Trump made a pitch for
Chinese companies to set up shop in the U.
S.
if he were to become president.
Those plans are going to be built in the United States, and our
people are going to man those plans.
I know, and look, I've heard Donald Trump say a couple of times that
he wants to see those Chinese companies come to the United States.
I think that would be a massive mistake.
Experts say this could be detrimental to the American auto
industry.
When you look at, for instance, The flat glass industry in the United States.
You think of the big windshields that are put on automobiles.
We used to make a lot of those in the United States, all over the
state of Ohio, many other places.
Many of those companies went out of business because again, China, you
know, more than a decade ago provided big subsidies to its glass companies.
They wiped out the competition.
So I don't want to see that happen with automobiles in the United States
because the Chinese auto companies just don't have that same cost of capital
as say Ford or Atlantis or GM do.
Vice President Kamala Harris, meanwhile, has not shared her
policy stance on EV production.
When will the Chinese actually begin to invest in the United
States or Mexico to manufacture?
Not before 2026, I'd say, is the quickest we'd see something happen.
It so much depends on how the next administration wants to play things.
Yes, nothing is set in stone just yet, but I personally think this is inevitable.
The U.
S.
can only hold the Chinese E.
V.
makers hostage.
Transcripts at play for so long before they come bursting through the floodgates.
The strategy of the Chinese automakers to use Mexico as a
springboard into North America could reshape the automotive landscape.
While this approach offers consumers potentially cheaper EV options,
it also prompts a re evaluation of trade agreements, national
security, and economic policy.
As this situation develops, all eyes are on how U.
S.
policymakers respond.
Will they tighten regulations, negotiate new terms with the U.
S.
MCA, or accept this as an evolution of the global trade dynamics?
The coming years will be critical in determining whether Chinese EVs
via Mexico becomes a staple in the American automotive diet, or if this
strategy will spark A new trade war
and thank you for watching and until next time take care out there and be nice