2024-02-17 14:21:36
Ronnie Nack
Just recently we reported that the Chinese automobile giant BYD signed an agreement to establish its first factory on European soil – in Hungary where there is a skilled workforce that comes from experience working in many other European and Japanese branded car factories including Suzuki, Audi and many more.
Now BYD is trying to gain a foothold in the North American market by “cutting corners” with a factory in Mexico. This was reported over the weekend in the economic press in Asia. In Latin America, BYD plans to spend over 600 million dollars to establish a factory in Brazil. Recently, BYD launched a feasibility study for a factory in Mexico as well. According to the sources, BYD is negotiating with federal and local Mexican government officials about the location and benefits for establishing the plant on its territory. Although the location of the plant is not yet finalized, it appears that the final candidates are the states of Nuevo León and the Baguio region in central Mexico.
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The biggest benefit that comes from manufacturing in Mexico involves lower export costs to the US. The US-Mexico-Canada agreement imposed high tariffs on imports of vehicles made outside of these three countries. Manufacturing in Mexico could give BYD a duty-free channel into this strategic market. In addition, a series of strikes led by the powerful labor unions in the US has raised wage costs in the US auto industry. The result is a widening wage gap between the US and Mexico (by the way, both Ford and GM have plants in Mexico).
In addition to this, the Biden administration set threshold conditions for tax benefits in the US for the purchase of an electric vehicle. One of these conditions includes the assembly of the vehicles in North America, along with restrictions on the source of the batteries and their raw materials.
BYD will not be the first Chinese company to manufacture in Mexico. It was preceded by MG, Chery and JAC which are already producing there. In addition, Tesla is also examining an area to establish its own factory – when the temptation of cheap labor is certainly great – in light of the erosion in the profitability of these companies in the last year.
For us, here in Israel, it is very interesting because it is possible to import cars with North American standards. Something that may open another import pipeline (official or parallel or both) for the electric brand whose Auto 3 was the best-selling vehicle in Israel in 2023.
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