Mexico may cut subsidies for Chinese manufacturers

Under pressure from the US, the Mexican government could stop incentivising Chinese EV manufacturers when building a factory there. BYD will be one of the manufacturers affected by this new policy.

As the news agency Reuters reports, the move concerns access to low-cost public land or tax breaks for investments in EV production in Mexico. Tesla will likely receive such subsidies for its Giga Mexico in the state of Nuevo Leon. Audi’s plant in San José Chiappas and BMW’s plant in San Luis Potosí probably profited from them as well.

Of the Chinese manufacturers, BYD is reportedly considering a plant in Mexico. According to Reuters, the last meeting between Mexican authorities and BYD took place in January. According to insiders, authorities made it clear that they would no longer offer incentives such as those granted to car manufacturers in the past and that future meetings with Chinese car manufacturers would be put on hold.

When asked by the news agency about the insider statements, the Mexican Ministry of Economy declined to comment. The office of Mexican President Andres Manuel Lopez Obrador did not respond to a request for comment, nor did BYD representatives or the Chinese embassy in Mexico.

There was only a response from the White House. A spokesperson stated that US President Joe Biden would “not let Chinese automakers flood the market with vehicles that pose a threat to national security.”

According to Reuters, around 20 Chinese car manufacturers currently offer vehicles in Mexico, and so far, all of them are imported. None of the companies operate a plant in Mexico, although according to the report, Chinese vehicles account for around a third of the total brand supply in Mexico.

A car plant in Mexico is attractive because of the subsidies granted to date, and production costs are lower than in the US. However, as Mexico is part of NAFTA (with the United States and Canada), vehicle imports from Mexico to the US are duty-free thanks to the free trade agreement. Moreover, EVs built in Mexico also qualify for US subsidies under the Inflation Reduction Act. However, in the case of Chinese EVs, the origin of the battery materials will likely remain a problem.

reuters.com