BYD Co Ltd, a Chinese auto manufacturer, plans to build a new electric vehicle (EV) factor in Mexico, according to Reuters and other news outlets. The EV maker looks to establish an export hub to the U.S.
The announcement comes as BYD, which is known for its less expensive models and diverse lineup, recently unseated rival Tesla to come the world’s highest-selling EV manufacturer. BYD launched a feasibility study for the Mexican plant and is negotiating with officials over terms, including where the factory will be.
A majority of BYD’s sales are in China, but the company eyes global expansion, Reuters reports. The company is building new plants overseas as well as growing its Chinese exports. Mexico is an attractive spot as it’s a large automaking sector and is connected with the U.S. industry.
“Overseas production is indispensable for an international brand,” BYD Mexico country manager Zhou Zou told Nikkei.
An increase in Chinese-manufactured EVs has raised concerns for U.S. automakers, including Tesla. U.S.-based companies have warned that BYD’s vehicles could damage their own prospects. Tesla Chief Executive Elon Musk recently said that Chinese automakers will “demolish” global rivals without trade barriers. Manufacturing EVs in Mexico for the U.S. would permit BYD to avoid high import tariffs that would be applied if their vehicles were send directly from China, The Wall Street Journal reports.
CEOs at rival automakers have also stated that the company poses a potential threat and some have suggested more government action to avert such competition in the U.S. These executives are worried about what they believe will be a big cost advantage for their Chinese competitors in the EV market.
A leading advocacy group shared Musk’s and other automaker executives’ concerns, Reuters reports.
“The introduction of cheap Chinese autos – which are so inexpensive because they are backed with the power and funding of the Chinese government – to the American market could end up being an extinction-level event for the U.S. auto sector,” according to a forthcoming report by the group Alliance for American Manufacturing.
Carlos Tavares, chief executive of Chrysler-parent Stellantis, called BYD’s expansion “very powerful” and compared it to Japanese automakers’ entry into the U.S. in the 1970s and South Korean firms in the 1990s. Tavares noted it’s critical that Chrysler be able to match BYD on cost, or would risk losing ground.
“You can see it in the European markets,” Tavares said during a conference call with analysts. “We may not want to see—a third time—the same movie.”
BYD plans to spend $620 million on a new industrial complex in northeastern Brazil. The three-plant complex is expected to be built in northeastern Bahia state, on land formerly occupied by a Ford plant that closed in 2021.
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