WEBVTT NOTE This file was generated by Descript 00:00:04.700 --> 00:00:06.880 Hi, and welcome to Best in Tesla. 00:00:07.470 --> 00:00:12.200 In the global race for electric vehicle dominance, China has strategically 00:00:12.240 --> 00:00:17.750 positioned itself not just as a leader in production, but also in market expansion. 00:00:17.930 --> 00:00:23.149 One of its most intriguing moves is the focus on Mexico, a country 00:00:23.150 --> 00:00:28.100 that serves as a geographical and economic bridge to the lucrative U. 00:00:28.100 --> 00:00:28.259 S. 00:00:28.259 --> 00:00:29.019 car market. 00:00:29.505 --> 00:00:34.315 Here's how China's EV strategy is unfolding south of the US border. 00:00:34.635 --> 00:00:37.675 And yes, Ford and GM should take notice. 00:00:37.925 --> 00:00:39.315 So let's check it all out. 00:00:39.355 --> 00:00:40.915 Let's dive right in. 00:01:18.635 --> 00:01:24.074 So Mexico seems to be the new frontier for Chinese EV manufacturers, for 00:01:24.074 --> 00:01:28.324 some of the same reasons that Tesla also chose Mexico as the place for 00:01:28.324 --> 00:01:30.494 their next generation car factory. 00:01:30.974 --> 00:01:35.370 Mexico has rapidly become the top top importer of Chinese vehicles 00:01:35.410 --> 00:01:37.569 with imports reaching a staggering 4. 00:01:37.570 --> 00:01:38.870 6 billion. 00:01:39.330 --> 00:01:42.980 Last year, this surge is not a coincidence, but part of China's 00:01:43.190 --> 00:01:47.549 broader plan to leverage Mexico's manufacturing capabilities and 00:01:47.549 --> 00:01:49.470 its adventurous trade agreement. 00:01:49.805 --> 00:01:55.535 The US Mexico Canada Agreement, or US MGA plays a pivoted role here, 00:01:55.595 --> 00:01:59.525 allowing vehicle manufacturer in Mexico to potentially enter the US 00:01:59.525 --> 00:02:05.015 market duty free, provided they meet certain local content requirements. 00:02:05.255 --> 00:02:09.634 CNBC made a nice piece about this topic, so let's try to take a look 00:02:09.634 --> 00:02:10.985 at some of the highlights here. 00:02:11.045 --> 00:02:13.955 The electric vehicle revolution shaped by trade tensions. 00:02:14.385 --> 00:02:16.795 Concern around competition from China is weighing on American 00:02:16.795 --> 00:02:18.204 lawmakers and auto companies. 00:02:18.415 --> 00:02:21.655 China's growing global auto dominance has some lawmakers on edge. 00:02:22.164 --> 00:02:25.325 At the center of that conversation is a country known for its beaches and 00:02:25.325 --> 00:02:27.025 its ideal trade proximity to the U. 00:02:27.025 --> 00:02:28.145 S., Mexico. 00:02:28.405 --> 00:02:32.024 The Chinese have targeted Mexico as a prime export market. 00:02:32.204 --> 00:02:32.715 Across the U. 00:02:32.715 --> 00:02:32.835 S. 00:02:32.835 --> 00:02:36.375 border, the country has seen an influx of Chinese made new energy cars. 00:02:36.674 --> 00:02:39.204 The Chinese automakers came to the country. 00:02:40.560 --> 00:02:44.700 And now some Chinese automakers, including Tesla rival BYD, are announcing 00:02:44.700 --> 00:02:46.240 plans to build factories in Mexico. 00:02:46.240 --> 00:02:47.130 But for the U. 00:02:47.130 --> 00:02:49.709 S., there's concern this might be a part of a larger strategy. 00:02:49.840 --> 00:02:52.029 The Chinese would love to access the U. 00:02:52.029 --> 00:02:52.169 S. 00:02:52.200 --> 00:02:55.220 market because there were profits to be made in the U. 00:02:55.220 --> 00:02:55.340 S. 00:02:55.359 --> 00:02:55.739 market. 00:02:55.980 --> 00:02:58.940 Getting in directly to the United States market is tricky because of 00:02:59.060 --> 00:03:01.130 the tariffs and other obstacles. 00:03:01.180 --> 00:03:04.950 And so I think many of these Chinese automakers look at Mexico as a backdoor 00:03:05.010 --> 00:03:06.160 in the United States of America. 00:03:06.605 --> 00:03:10.334 Washington has built a wall to block cheap exports using tariffs, but experts 00:03:10.335 --> 00:03:11.935 say these may only be buying time. 00:03:12.114 --> 00:03:13.845 It's the Chinese version of a Godzilla. 00:03:13.975 --> 00:03:16.775 Get ready, this thing's coming and it's going to shake up the world. 00:03:17.005 --> 00:03:17.815 Yes, the U. 00:03:17.815 --> 00:03:18.025 S. 00:03:18.025 --> 00:03:20.625 government has only delayed the inevitable. 00:03:20.644 --> 00:03:24.535 The Chinese are coming, and they will still come fast, as they 00:03:24.535 --> 00:03:29.135 need to find new markets to ship all their EVs to, and the U. 00:03:29.135 --> 00:03:29.345 S. 00:03:29.415 --> 00:03:31.785 is the second biggest auto market in America. 00:03:31.799 --> 00:03:34.719 The world and a very profitable one as well. 00:03:35.100 --> 00:03:39.329 So of course the Chinese will do all they can to enter this 00:03:39.329 --> 00:03:41.730 market one way or another. 00:03:42.489 --> 00:03:45.711 Chinese automakers are winning over millions of drivers around the world. 00:03:45.711 --> 00:03:50.217 Last year, China produced over half of all electric vehicles sold worldwide. 00:03:50.217 --> 00:03:53.290 Supported by government subsidies and lagging domestic demand. 00:03:53.670 --> 00:03:56.279 Chinese AV makers have had to look overseas to sell their cars. 00:03:56.690 --> 00:03:59.959 Last year, China overtook Japan to become the world's largest auto exporter. 00:04:00.450 --> 00:04:00.719 sending 4. 00:04:00.720 --> 00:04:02.990 9 million cars overseas and 1. 00:04:02.990 --> 00:04:05.090 2 million of those cars were electric. 00:04:05.340 --> 00:04:09.340 China has built up such automotive production capacity that it can't possibly 00:04:09.340 --> 00:04:11.920 sell all of those vehicles in China, so it has to look to other markets. 00:04:12.290 --> 00:04:15.040 Almost overnight, Mexico has become a major market. 00:04:15.130 --> 00:04:18.789 Chinese automakers are, um, becoming more international. 00:04:19.039 --> 00:04:22.040 So Mexico fits in this broader story of Chinese companies 00:04:22.050 --> 00:04:23.500 trying to access new markets. 00:04:23.890 --> 00:04:27.160 In 2023, the country was the leading importer of cars made in China. 00:04:27.540 --> 00:04:28.340 Importing a total of 4. 00:04:28.340 --> 00:04:30.750 6 billion worth of Chinese vehicles. 00:04:31.265 --> 00:04:32.145 That's compared to 4. 00:04:32.615 --> 00:04:33.715 4 billion from U. 00:04:33.715 --> 00:04:33.805 S. 00:04:33.805 --> 00:04:34.505 based companies. 00:04:35.065 --> 00:04:41.615 So, Mexico last year bought more cars from China than its neighboring country, the U. 00:04:41.615 --> 00:04:41.975 S. 00:04:42.104 --> 00:04:44.655 So not only are the Chinese coming for the U. 00:04:44.655 --> 00:04:44.854 S. 00:04:44.854 --> 00:04:48.984 market, but are also stealing market share in the surrounding countries. 00:04:49.265 --> 00:04:53.295 So I hope people can see the threat that Chinese automakers are to 00:04:53.295 --> 00:04:55.155 the Western legacy automakers. 00:04:55.245 --> 00:04:59.594 First, they overtook Japan as the leading export country for cars, and 00:04:59.594 --> 00:05:04.815 now also export more cars to Mexico than the US automakers are able to do. 00:05:04.874 --> 00:05:08.024 And of course, the expectation is that the Chinese EVs will make 00:05:08.044 --> 00:05:12.354 up about 25 percent of all EVs sold in Europe this year as well. 00:05:12.414 --> 00:05:15.775 They are quickly taking over on a global scale. 00:05:15.985 --> 00:05:18.735 And Mexican consumers are quickly embracing Chinese made EVs. 00:05:19.110 --> 00:05:22.550 Last year, 1 in 10 vehicles sold in Mexico were made by a Chinese company, 00:05:22.680 --> 00:05:24.210 outpacing every other foreign country. 00:05:24.760 --> 00:05:27.759 Even consumers weary of electric cars are drawn to Chinese EVs 00:05:27.800 --> 00:05:29.060 for their affordable price tags. 00:05:29.620 --> 00:05:33.579 BYD sells its Dolphin Mini in Mexico for around 398, 000 pesos. 00:05:34.009 --> 00:05:37.939 That's around 21, 000, a little less than half the price of the cheapest Tesla. 00:05:38.575 --> 00:05:42.195 The Chinese automakers came to the country very aggressively. 00:05:42.515 --> 00:05:44.675 They have, to be honest, very good promotions. 00:05:44.875 --> 00:05:48.915 Chinese cars, it's a good product that sells at a very reasonable price. 00:05:50.545 --> 00:05:53.764 Experts say China's entrance to Mexico follows a broader strategy to 00:05:53.764 --> 00:05:56.785 target emerging economies, which can be friendlier to foreign investment. 00:05:57.344 --> 00:06:00.905 Latin America, parts of Asia, and the Middle East have all seen influxes 00:06:00.984 --> 00:06:02.744 of Chinese made cars in recent years. 00:06:02.954 --> 00:06:08.074 Unlike the developed economies, the emerging ones are less 00:06:08.124 --> 00:06:12.054 complicated, less complex, in terms of regulations, and I'm talking 00:06:12.054 --> 00:06:14.634 about safety standards or emissions. 00:06:14.805 --> 00:06:18.014 Chinese car makers, if you look at the figures, they are gaining 00:06:18.034 --> 00:06:21.655 traction faster in those economies than in the developed economies. 00:06:22.094 --> 00:06:24.244 For example, Latin America, which is the current government in Brazil, 00:06:24.244 --> 00:06:28.564 was, was, uh, quite enthusiastic about welcoming BYD's newest investment. 00:06:28.564 --> 00:06:31.194 They now have a factory in Brazil that they're building. 00:06:31.254 --> 00:06:36.155 Similarly, I think the biggest recipient of Chinese, um, investment in terms of new 00:06:36.414 --> 00:06:38.134 electric vehicle factories is Thailand. 00:06:38.134 --> 00:06:40.424 So usually these companies go where they're welcome. 00:06:40.674 --> 00:06:43.494 Earlier this year, multiple Chinese automakers have announced plans 00:06:43.494 --> 00:06:45.224 to open EV factories in Mexico. 00:06:45.604 --> 00:06:49.254 Mexican states Durango, Jalisco, and Nuevo Leon have even offered 00:06:49.254 --> 00:06:52.275 incentives to Chinese automakers to open manufacturing operations. 00:06:52.794 --> 00:06:55.784 These include tax breaks, free land, and help hiring labor. 00:06:56.104 --> 00:07:00.534 And this is, of course, the same reasons as why Tesla is also going to 00:07:00.534 --> 00:07:02.825 build their next Gigafactory in Mexico. 00:07:03.154 --> 00:07:04.344 To get access to the U. 00:07:04.344 --> 00:07:04.474 S. 00:07:04.494 --> 00:07:08.864 market without any taxes on their cars and cheap labor, of course. 00:07:09.130 --> 00:07:12.400 And they, of course, also got some great deals from Mexico to 00:07:12.400 --> 00:07:14.570 build a factory in the country. 00:07:14.880 --> 00:07:18.869 Experts say this process of nearshoring, or bringing production closer to the final 00:07:18.940 --> 00:07:20.999 target market, would benefit both parties. 00:07:21.320 --> 00:07:24.040 For Mexico, the factories would bring jobs and limit the cost 00:07:24.040 --> 00:07:25.230 of importing so many cars. 00:07:25.680 --> 00:07:29.090 For Chinese companies, they could increase a foothold in the North American market. 00:07:29.505 --> 00:07:31.105 But this is what has Washington worried. 00:07:34.925 --> 00:07:38.325 Mexico is already a manufacturing powerhouse, serving as a hub for 00:07:38.325 --> 00:07:39.615 many international auto brands. 00:07:40.024 --> 00:07:42.745 Tesla has been exploring manufacturing sites in the country, although 00:07:42.745 --> 00:07:43.725 plans are on hold for now. 00:07:44.255 --> 00:07:47.164 This started in the mid 90s, with the signing of the North America 00:07:47.174 --> 00:07:50.864 Free Trade Agreement, or NAFTA, which removed tariffs on many goods traded 00:07:50.865 --> 00:07:52.375 between the US, Mexico, and Canada. 00:07:52.605 --> 00:07:54.195 The big winners were auto companies. 00:07:54.430 --> 00:07:56.940 The most recent iteration of the trade agreement was enacted 00:07:57.030 --> 00:07:58.220 by Donald Trump in 2018. 00:07:58.730 --> 00:07:59.350 It's called the U. 00:07:59.350 --> 00:07:59.510 S. 00:07:59.510 --> 00:08:01.760 Mexico Canada Agreement, or the USMCA. 00:08:02.170 --> 00:08:06.830 First, the Germans gave, you know, all the, uh, BMW, and then the Japanese 00:08:06.850 --> 00:08:11.780 gave Toyota, Honda, and then lastly the Koreans gave Hyundai, Kia, and others. 00:08:12.190 --> 00:08:15.080 Some people now are arguing that the next way to It's going to 00:08:15.080 --> 00:08:16.520 be driven by Chinese companies. 00:08:16.880 --> 00:08:20.260 Mexico is an attractive production platform, uh, not only for Chinese 00:08:20.260 --> 00:08:23.320 companies, but for other companies as well, in part because of that free trade 00:08:23.320 --> 00:08:25.850 access that it has to the American market. 00:08:25.879 --> 00:08:29.389 And it can do something that in trade terms is called circumvention. 00:08:30.160 --> 00:08:33.169 In order to sell its overcapacity of cars, China needs to access 00:08:33.229 --> 00:08:34.250 wealthier markets like the U. 00:08:34.250 --> 00:08:34.470 S. 00:08:34.490 --> 00:08:34.890 and Europe. 00:08:35.260 --> 00:08:36.110 But so far in the U. 00:08:36.110 --> 00:08:38.380 S., they've been blocked by tariffs and political tension. 00:08:38.770 --> 00:08:41.079 To get around these barriers, China could take advantage of the USMCA. 00:08:42.400 --> 00:08:43.584 It would look something like this. 00:08:43.965 --> 00:08:46.815 If a Chinese auto company were to set up operations in Mexico or 00:08:46.815 --> 00:08:50.155 Canada, and prove that the majority of materials that they use to build 00:08:50.155 --> 00:08:53.634 their cars are sourced locally, they could export their cars into the U. 00:08:53.635 --> 00:08:53.775 S. 00:08:53.775 --> 00:08:55.155 market virtually duty free. 00:08:55.505 --> 00:08:58.715 For EV production, Chinese automakers have narrowed in on Mexico for 00:08:58.715 --> 00:09:01.494 its manufacturing infrastructure, low labor costs, and most 00:09:01.495 --> 00:09:02.835 importantly, proximity to the U. 00:09:02.835 --> 00:09:03.015 S. 00:09:03.565 --> 00:09:05.995 It's a strategy that Chinese companies have used before. 00:09:06.420 --> 00:09:09.660 For more than a decade now, China and the United States have been playing 00:09:09.670 --> 00:09:13.770 a high stakes game of whack a mole when it comes to trade policy tariffs 00:09:13.770 --> 00:09:14.970 and trying to get into the market. 00:09:15.050 --> 00:09:19.530 And we've seen China do this in other types of manufacturing, from 00:09:19.570 --> 00:09:22.659 appliances to auto parts to steel. 00:09:22.690 --> 00:09:26.100 And so autos is the next logical sector for China to 00:09:26.100 --> 00:09:27.530 scale up investment in Mexico. 00:09:28.110 --> 00:09:29.860 It's a potential scenario that terrifies U. 00:09:29.860 --> 00:09:29.980 S. 00:09:29.980 --> 00:09:31.124 officials and automakers. 00:09:31.485 --> 00:09:35.185 If they're able to do that, set up in Mexico to manufacture in the United 00:09:35.185 --> 00:09:41.395 States, they would definitely pose an imminent threat to American auto makers. 00:09:41.845 --> 00:09:44.894 If for no other reason, because their cost would be lower. 00:09:45.274 --> 00:09:47.494 Really the most lucrative market in the world, in a lot 00:09:47.494 --> 00:09:48.715 of ways, is the American market. 00:09:49.055 --> 00:09:51.915 We're only 5 percent of the world's population, but we consume 20 00:09:51.915 --> 00:09:53.085 percent of the world's goods. 00:09:53.235 --> 00:09:55.975 We are great at consumption, and Americans like a deal. 00:09:56.035 --> 00:10:01.220 And if they were to see, A Chinese made EV that comes in at 000. 00:10:01.550 --> 00:10:05.280 They're very price motivated and these things could potentially wipe 00:10:05.280 --> 00:10:06.920 out a lot of the U S competition. 00:10:07.540 --> 00:10:11.500 Yes, GM has said themself that they will not be able to make 00:10:11.500 --> 00:10:17.020 an EV in the 30 to $40,000 price range, profitable this decade. 00:10:17.200 --> 00:10:22.150 And Volkswagen has put out their Trinity platform to 2032, which should enable 00:10:22.150 --> 00:10:24.130 Volkswagen to make more affordable EVs. 00:10:24.130 --> 00:10:26.860 And Ford has just announced they will be pushing their next 00:10:26.860 --> 00:10:29.290 generation platform out to 2027. 00:10:29.770 --> 00:10:34.660 So basically, no one of the old legacy automakers have something come. 00:10:35.330 --> 00:10:40.460 Competitive on cost ready within this decade, especially something that can 00:10:40.460 --> 00:10:46.880 compete with a Chinese EV for about 20 to $25,000 in the US For now, none of 00:10:46.880 --> 00:10:50.480 the major Chinese automakers have begun building factories in Mexico and many have 00:10:50.480 --> 00:10:52.340 stalled plans citing tension with the us. 00:10:53.065 --> 00:10:57.955 The sentiment among the Chinese automakers I talked to is that things are so tense 00:10:57.955 --> 00:10:59.605 between the US and China right now. 00:10:59.995 --> 00:11:04.075 That now is not the right time to come and invest in the us Not the right time 00:11:04.075 --> 00:11:06.715 politically, just too much tension. 00:11:07.165 --> 00:11:10.645 Mexican government officials have likewise paused incentives to Chinese automakers. 00:11:10.915 --> 00:11:14.095 BYD has publicly walked back intentions to enter the US market, 00:11:14.485 --> 00:11:16.315 least for now, they're not ready. 00:11:16.675 --> 00:11:19.135 But then for BYD, we are ready. 00:11:19.465 --> 00:11:21.745 The U-S-M-C-A is set to be reviewed in 2026. 00:11:22.245 --> 00:11:24.945 And who leads that discussion from the White House remains up in the air. 00:11:25.535 --> 00:11:28.765 At the Republican National Convention in July, Donald Trump made a pitch for 00:11:28.765 --> 00:11:30.525 Chinese companies to set up shop in the U. 00:11:30.525 --> 00:11:30.705 S. 00:11:30.705 --> 00:11:31.645 if he were to become president. 00:11:31.965 --> 00:11:34.375 Those plans are going to be built in the United States, and our 00:11:34.375 --> 00:11:36.124 people are going to man those plans. 00:11:36.865 --> 00:11:40.514 I know, and look, I've heard Donald Trump say a couple of times that 00:11:40.515 --> 00:11:43.025 he wants to see those Chinese companies come to the United States. 00:11:43.055 --> 00:11:44.975 I think that would be a massive mistake. 00:11:45.315 --> 00:11:47.635 Experts say this could be detrimental to the American auto 00:11:47.705 --> 00:11:48.165 industry. 00:11:48.395 --> 00:11:51.775 When you look at, for instance, The flat glass industry in the United States. 00:11:51.795 --> 00:11:54.445 You think of the big windshields that are put on automobiles. 00:11:54.685 --> 00:11:56.825 We used to make a lot of those in the United States, all over the 00:11:56.825 --> 00:11:58.315 state of Ohio, many other places. 00:11:58.685 --> 00:12:02.374 Many of those companies went out of business because again, China, you 00:12:02.375 --> 00:12:05.715 know, more than a decade ago provided big subsidies to its glass companies. 00:12:05.715 --> 00:12:06.945 They wiped out the competition. 00:12:07.075 --> 00:12:09.885 So I don't want to see that happen with automobiles in the United States 00:12:09.915 --> 00:12:13.465 because the Chinese auto companies just don't have that same cost of capital 00:12:13.765 --> 00:12:17.295 as say Ford or Atlantis or GM do. 00:12:17.710 --> 00:12:19.880 Vice President Kamala Harris, meanwhile, has not shared her 00:12:19.880 --> 00:12:21.450 policy stance on EV production. 00:12:21.680 --> 00:12:24.010 When will the Chinese actually begin to invest in the United 00:12:24.010 --> 00:12:25.640 States or Mexico to manufacture? 00:12:26.130 --> 00:12:30.600 Not before 2026, I'd say, is the quickest we'd see something happen. 00:12:30.970 --> 00:12:36.080 It so much depends on how the next administration wants to play things. 00:12:36.320 --> 00:12:41.959 Yes, nothing is set in stone just yet, but I personally think this is inevitable. 00:12:41.980 --> 00:12:42.519 The U. 00:12:42.519 --> 00:12:42.689 S. 00:12:42.719 --> 00:12:44.319 can only hold the Chinese E. 00:12:44.320 --> 00:12:44.500 V. 00:12:44.500 --> 00:12:44.869 makers hostage. 00:12:45.330 --> 00:12:49.440 Transcripts at play for so long before they come bursting through the floodgates. 00:12:49.560 --> 00:12:53.049 The strategy of the Chinese automakers to use Mexico as a 00:12:53.049 --> 00:12:57.520 springboard into North America could reshape the automotive landscape. 00:12:57.910 --> 00:13:02.060 While this approach offers consumers potentially cheaper EV options, 00:13:02.249 --> 00:13:06.430 it also prompts a re evaluation of trade agreements, national 00:13:06.430 --> 00:13:07.770 security, and economic policy. 00:13:08.810 --> 00:13:12.120 As this situation develops, all eyes are on how U. 00:13:12.120 --> 00:13:12.300 S. 00:13:12.300 --> 00:13:13.700 policymakers respond. 00:13:13.860 --> 00:13:17.670 Will they tighten regulations, negotiate new terms with the U. 00:13:17.670 --> 00:13:17.820 S. 00:13:17.850 --> 00:13:22.800 MCA, or accept this as an evolution of the global trade dynamics? 00:13:23.060 --> 00:13:27.460 The coming years will be critical in determining whether Chinese EVs 00:13:27.490 --> 00:13:32.750 via Mexico becomes a staple in the American automotive diet, or if this 00:13:32.760 --> 00:13:35.365 strategy will spark A new trade war 00:13:37.805 --> 00:13:44.224 and thank you for watching and until next time take care out there and be nice