BYD, a prominent Chinese electric vehicle (EV) manufacturer, is considering the establishment of a production facility in Mexico. According to Zhou Zou, the company’s country manager for Mexico, this potential facility aims to serve as an export hub for the U.S. market. This initiative is part of BYD’s broader strategy to enhance its international presence, as the company’s sales outside China constituted only 8% of its total sales last year, despite leading global EV sales in the fourth quarter of 2023, surpassing Tesla.
BYD’s global expansion strategy includes the development of new manufacturing plants outside China. The company has recently opened facilities in Thailand and has announced plans for a plant in Hungary within the next three years. In Latin America, BYD has committed to a $605 million investment to build a plant in Brazil. The feasibility study for the potential Mexican plant is currently in progress, with ongoing negotiations with both national and local government officials regarding the site and terms. Potential locations under consideration include Nuevo Leon in the north, the Bajio region in central Mexico, and the Yucatan Peninsula.
Establishing a manufacturing facility in Mexico would offer several benefits, including lower export costs to the U.S. and advantages under the U.S.-Mexico-Canada Agreement’s manufacturing quotas. It would also help mitigate the impact of rising labor costs in the U.S. compared to Mexico. Additionally, U.S. tax incentives for EV purchases, which mandate North American assembly and specific battery sourcing conditions, highlight the strategic value of a regional manufacturing presence for Chinese EV manufacturers.
Despite a slowdown in the global EV market and uncertainties regarding U.S. political support for EVs, demand for electric and plug-in hybrid vehicles continues to grow globally. The Mexican market, in particular, has seen a significant increase in vehicle sales, with Chinese vehicles making a notable impact. Investments from other major EV manufacturers, including Tesla, Kia, BMW, and Stellantis, further position Mexico as a burgeoning hub for the EV industry. Increased Chinese investments in Mexico reflect a strong interest in the market for nearshoring opportunities.
