Chinese automakers invested millions to build electric vehicle factories in Mexico. This move is a potential attempt to sell to American consumers while avoiding the high U.S. tariffs on cars imported from China. However, a recent report from Reuters has indicated the Mexican government may put a stop to this.
The 27.5% tax that Chinese car companies want to get around does not apply to vehicles with at least three-quarters of their core parts built in the continent of North America. This is why automakers could set up shop in Mexico, make their EVs there and then sell them to Americans at cheaper rates than U.S. automakers are able to do.
This is because Beijing currently dominates the supply chain for the materials needed to make electric vehicles. As a result, EVs cost nearly $20,000 less in China than they do in the U.S. An EV that costs about $53,000 for Americans costs about $35,000 for Chinese consumers on average.
China already used this pricing advantage in Europe, where Chinese-made EVs flooded the market. Sales of electric vehicles made in China are expected to take up a quarter of the total European EV market this year. Their success is attributed to the Chinese government’s ability to manipulate the market so their cars can sell for less. All that Beijing needed was a way to offer those same savings to American drivers.
Mexican officials threw a wrench in any ideas to do this through their country. Officials told executives from BYD, China’s largest EV maker, they will not be getting any of the favorable accommodations offered to others in the industry. Chinese car brands will not receive incentives to build their factories in Mexico like those previously awarded to other automakers.
This means no low-cost public land deals or tax cuts for their investments in EV production. The Mexican government also told BYD it will not take future meetings with car companies from China.
According to Reuters sources, the Mexican government’s decisions were because of pressure from the U.S. government, which while trying to get more EVs on American roads, is simultaneously working to keep Chinese made ones out. A White House spokesperson has labeled these electric vehicles from China as a threat to U.S. national security.
