Mexico boxes out Chinese NEV production
Chinese new energy vehicle (NEV) producers are getting the cold shoulder from Mexico.
- On April 18, Reuters scooped that the Mexican government is excluding Chinese companies from domestic NEV investment incentives.
The catalyst: Pressure from the US, which fears Chinese manufacturers are trying to gain back-door access to the US market.
- No Chinese companies currently produce NEVs in Mexico.
- However, the United States-Mexico-Canada Agreement (USMCA) technically enables them to use Mexico-based production to circumvent the US's 27.5% tariff on Chinese NEVs.
Some context: Mexican officials met with Chinese producer BYD in January and indicated they would exclude Chinese firms from any incentives.
- BYD was previously looking for a local partner to invest in.
Mexico's decision is a double-edged sword.
- While it keeps the US happy, it means key localities – like Mexico State, Nuevo León, and Jalisco – risk losing out on hundreds of millions of dollars worth of direct investment.
Get smart: Mexico won't be the last country caught in the crossfire of escalating US-China trade tensions.
- Companies and investors should map out their exposure to third-party countries and ensure they understand the spillover risks if economic relations between China and the US continue to deteriorate.