BYD may not build its planned Mexican factory

China has apparently delayed the approval for the construction of BYD’s Mexican plant. Chinese authorities fear that Mexico could gain unrestricted access to BYD’s advanced technology and know-how and potentially share it with the US.

The Financial Times reports, citing two people familiar with the matter, that there are other reasons why Beijing could oppose a Chinese carmaker setting up production in Mexico.

Like all Chinese companies, BYD needs permission from the Chinese government to do so. “The commerce ministry’s biggest concern is Mexico’s proximity to the US,” one of the people told the FT.

Back door

The US administration has accused Mexico of being a back door for goods from China amid the growing trade dispute between the two countries. Washington has imposed additional tariffs on goods from China and Mexico.

However, in the latter case, the automotive industry is exempt, at least for now. As Mexico tries to stay in US President Trump’s good graces, China fears too much information concerning its carmakers could leak across the border.

“Mexico’s new government has taken a hostile attitude toward Chinese companies, making the situation even more challenging for BYD,” the second insider told the Financial Times.

It would not be the first time that Mexico has been pressured by the US regarding China. About a year ago, the country scrapped incentives for Chinese carmakers to build factories there.

Focus on Mexico

Nevertheless, BYD has been known to increasingly focus on Mexico, aiming to sell 100,000 electric cars there this year, compared to a target of 50,000 EVs for 2024.

Plans for a BYD production facility first emerged in early 2024, with BYD saying it would create around 10,000 jobs and produce 150,000 vehicles there per year.

It is still unclear whether BYD intends to proceed with the plans, provided Beijing gives it the green light. According to Mexico’s President Claudia Sheinbaum, the carmaker still has not submitted a firm proposal.

BYD’s executive Vice President Stella Li said earlier that the carmaker had “not decided on the Mexico facility yet.” Initially, it wanted to announce the factory’s location by the end of 2024.

Trade agreement under Trump fire

The US, Canada, and Mexico formed a North American free trade region (NAFTA) in 1994. In 2020, it became the US-Mexico-Canada Agreement (USMCA), which still means BYD could import its cars built in Mexico duty-free into the US and Canada.

At least theoretically, tariffs imposed by US President Trump could change that narrative. Trump has recently threatened with 25% or even 50% general trade tariffs on Canada and Mexico but has postponed them temporarily.

Under the previous administration, the US raised customs duties on electric vehicles from China from 25% to 100%, and Canada followed suit. In June 2024, BYD reacted and said it would not come to the US as “it is very complicated.”