China’s BYD Eyes Mexico for Electric Vehicle Production, Targets U.S. Market

China’s BYD is continuing to expand its presence in the international market. Although the overseas sales ratio was only 8% in 2023, it is expected to significantly expand its export market and local production from this year. The CEO of BYD Japan, Zhou Zhou, revealed in an interview with the Nihon Keizai Shimbun that he is considering producing electric cars in Mexico. After Brazil, they plan to establish a production base in Mexico and develop it as an export hub for the U.S. market. He stated that overseas production is an essential element for international brands, and Mexico is a market with great potential. Nihon Keizai reported his intention to build a factory.

In addition to expanding exports, BYD is also actively building factories overseas. This year, they plan to start operations at a factory in Thailand and build a new factory in Hungary. The company plans to invest 3 billion reals (approximately 90 billion yen / $819 million) to build a new factory in Brazil.

In addition to Tesla, which announced the construction of a Gigafactory in Nuevo Leon, BMW and Stellantis announced in 2023 that they will produce electric vehicles in Mexico. Kia also plans to produce electric vehicles in Mexico.

In 2023, new car sales in Mexico increased 24% from the previous year to approximately 1.36 million units. Chinese vehicles accounted for about 120,000 units, a 60% increase from 22 years ago. Three Chinese brands, MG, Chery Automobile, and JAC, are leading the market. However, their electric vehicles are not yet being sold in earnest.

One of the biggest advantages of entering Mexico is reducing export costs to the U.S. The United States-Mexico-Canada Agreement (USMCA), which the U.S. signed with Mexico and Canada, strengthened the proportion of North American production required to export automobiles to the U.S. without tariffs. The wage gap between the U.S. and Mexico has widened due to a series of strikes, leading to higher labor costs in the U.S.