This article is written by Austin Garcia
The U.S. government is concerned. They worry about cheap Chinese cars and parts. These imports could threaten American car companies. The Alliance for American Manufacturing calls this a big danger. They warn of an “extinction-level threat” for the U.S. auto sector.
Chinese automakers found a way around U.S. tariffs. They set up factories in Mexico. They must follow rules on local production. To avoid U.S. tariffs, goods need certain regional content. Usually, 75% of assembly and parts must be local. This percentage changes by product and sector.
USMCA Benefits and Chinese EV Plans
Vehicles and parts made in Mexico can get special treatment. This is under the U.S.-Mexico-Canada trade agreement (USMCA). They can also get a $7,500 electric vehicle (EV) tax credit. This issue gained attention recently. China’s BYD planned an EV factory in Mexico.
A bipartisan group of U.S. lawmakers spoke out. They urged the Biden administration to raise tariffs. This would be on Chinese-made vehicles. They also want to stop Chinese companies. They seek ways to prevent exports from Mexico to the U.S.
Chinese EV companies have grown fast. They are now big rivals for U.S. automakers like Tesla. Last year, China’s EV exports soared. They rose 131.8% from the year before. This was about 680,000 units.
Mexican officials made a statement. They will not give incentives like in the past. They will pause future meetings with Chinese automakers. This is a shift in their approach.
Mexican States Seek Investment
Despite this, some Mexican states want Chinese automakers. Durango, Jalisco, Mexico State, and Nuevo Leon seek assembly plants. They offer many incentives. Nuevo Leon approved $153 million in incentives for a Tesla plant last December. Federal incentives used to be generous. They included free land, water, and energy. They also helped with hiring workers. Francisco Bautista, an EY partner in Mexico, shared this.
This situation keeps changing. It’s key to watch all parties. This includes the U.S. government. American car makers, Mexican officials, and Chinese automakers are all involved.
