BYD, a prominent Chinese electric vehicle (EV) manufacturer, is contemplating the establishment of a production facility in Mexico, with the aim of creating an export hub focused on the U.S. market. Zhou Zou, the company’s country manager for Mexico, disclosed this plan as part of BYD’s strategy to enhance its international footprint. Despite leading global EV sales in the fourth quarter of 2023, surpassing Tesla, BYD’s sales outside China accounted for only 8% of its total sales last year.
As part of its global expansion endeavors, BYD is constructing new manufacturing plants outside China, including facilities in Thailand, and plans are underway for a plant in Hungary within the next three years. In Latin America, the company has committed to investing 3 billion reals ($605 million) to establish a plant in Brazil. The feasibility study for the Mexican plant is currently ongoing, with negotiations in progress with national and local government officials regarding the location and terms for the new facility. Although no specific location has been confirmed, potential areas under consideration include Nuevo Leon in the north, the Bajio region in central Mexico, and the Yucatan Peninsula.
Establishing manufacturing capacity in Mexico presents several advantages, including lower export costs to the U.S., leveraging the manufacturing quotas outlined in the U.S.-Mexico-Canada Agreement, and mitigating the impact of rising labor costs compared to the U.S. Additionally, U.S. tax incentives for EV purchases, which mandate North American assembly and specific battery sourcing conditions, highlight the strategic significance of having a manufacturing presence in the region for Chinese EV manufacturers.
Despite a global slowdown in the electric vehicle (EV) market and uncertainties surrounding U.S. political support for EVs, the demand for electric and plug-in hybrid vehicles continues to rise worldwide. The Mexican market, in particular, has witnessed a significant uptick in vehicle sales, with Chinese vehicles making a substantial presence. This growth is further bolstered by investments from other major EV manufacturers such as Tesla, Kia, BMW, and Stellantis in Mexico, positioning the country as an emerging manufacturing hub for the EV industry. Moreover, Chinese investments in Mexico have experienced a notable surge, indicating a strong interest in the Mexican market for nearshoring investments.