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Hear that?
That’s the sound of auto execs quaking in their boots, following the latest signal that their Chinese competitors are coming for the US EV market.
Nikkei Asia this week reported that BYD, the Warren Buffett-backed Chinese company that recently surpassed Tesla to become the world’s top EV seller, is “considering” establishing an EV plant in Mexico to use as an export hub to enter the US market without high tariffs.
The report, based on an interview with Zhou Zou, a BYD executive in Mexico, said the automaker is studying the feasibility of such a project and negotiating with officials in Mexico. “Overseas production is indispensable for an international brand,” Zou told Nikkei.
The news comes as no surprise to industry observers and stakeholders.
“The Mexican market is about 10% occupied by Chinese manufacturers at the moment,” Sam Fiorani, VP of global vehicle forecasting for AutoForecast Solutions, told Tech Brew. “Their market share growth has been so quick that it was just a matter of time before they reached a critical mass that they could build locally. And once they build locally, then they get around the 25% tariff [on Chinese-made vehicles] and they can come to the US.”
Once Chinese EVs eventually make their way across the US-Mexico border, Fiorani said the low-cost models around which China has built a leading EV market are likely to undercut offerings from the likes of Tesla, GM, Ford, and Stellantis—especially because the domestic automakers largely gave up on producing low-priced vehicles in favor of more-profitable SUVs and trucks.
“It will open up the EV market to new buyers while putting downward pressure on pricing on all the EV models,” Fiorani said.
US auto execs haven’t been shy about their concerns about competition from China’s EV sector.
“The Chinese car companies are the most competitive car companies in the world,” Tesla CEO Elon Musk said during the automaker’s Q4 earnings call. “Frankly, I think if there are not trade barriers established, they will pretty much demolish most other companies in the world.”
As Morning Brew previously reported, BYD’s EV sales grew 73% YoY in 2023, when it also boosted its international deliveries more than 3x. BYD is also establishing plants in Brazil, Hungary, and Thailand.
Ford CEO Jim Farley had a similar message during a recent Q4 earnings call, telling analysts that the company’s “ultimate competition is going to be the affordable Tesla and the Chinese OEMs.”