The US forces Mexico to suspend support programs for Chinese electric car manufacturers

In the last couple of years, Mexico has tried to attract investments from car manufacturers who want to produce cars in the country – Tesla has announced a factory in Mexico, others also want them, but the big northern neighbor, the USA, is putting pressure on the Mexicans not to support Chinese car manufacturers and not to offer various concessions to Chinese electric car manufacturers , that is, Mexico does not offer the Chinese tax breaks, land at lower prices, and similar benefits, in talks with Reuters expressed by several representatives of the government.

Representatives of the Mexican government met with BYD – one of the largest Chinese car manufacturers – in January, making it clear that they will no longer offer the same concessions as before. Plans for a meeting between the two sides at some point in the future have also been put on hold.

The Americans are putting pressure on Mexico because they don’t want to allow the Chinese to get their cars into the US through the back door – Mexico, the US and Canada have signed a free trade agreement. The U.S. is trying to restrict Chinese automakers from entering its market by raising import tariffs, but the Chinese can theoretically get around that if they set up a factory in Mexico and produce enough cars there. Accordingly, to avoid American import tariffs, a certain amount of product components must be manufactured and assembled in North America. By building a factory in Mexico and manufacturing machines there, the Chinese would fulfill this condition.

BYD does not want to abandon plans to build a factory in Mexico, explaining that the plans are for production for the domestic market and not for export to the United States, but market analysts are skeptical. The automaker has tried to get relief at the state rather than the federal level, but the reliefs offered by the states are far less valuable than those offered by Mexico’s federal government.

Mexicans say that while investments from Chinese automakers could help the local economy, they don’t want to anger Washington for one simple reason: the free trade agreement between the three countries could be revised in 2026. Clearly, Mexico does not want to complicate relations with the United States, as less favorable terms of trade would be a bigger blow than the potential benefits of Chinese investment in auto manufacturing.