BYD Plans to Open Factory in Mexico
Chinese automaker BYD is considering opening a plant in Mexico, potentially taking advantage of the US-Mexico-Canada Agreement and targeting the lower end of the new car market.
BYD's Global Ambitions
BYD, known as Build Your Dreams, has become a major player in the automotive industry. In 2023, it sold over 3 million cars, including a significant number of hybrids and battery-electric vehicles. This success is partly due to the fact that BYD offers a larger portfolio of vehicles, including smaller and cheaper models. Now, the Chinese automaker is considering opening a factory in Mexico, adding to its list of global manufacturing locations in Thailand, Hungary, and Brazil.
Although BYD's sales are primarily in China, the company has set its sights on expanding internationally. Opening a plant in Mexico is a strategic move that would help BYD tap into the US market more effectively.
Advantages of Manufacturing in Mexico
Mexico is an attractive location for car manufacturers due to its skilled workforce and high automobile production. With over a million people employed in the sector, there is an existing pool of talent available. Moreover, the country produces 3.7 million cars per year, making it an ideal manufacturing hub.
By setting up a factory in Mexico, BYD would also benefit from the US-Mexico-Canada Agreement (USMCA), which allows for lower prices on imported cars. This advantage would be particularly beneficial if BYD plans to target the lower end of the new car market, which is currently underserved.
Taking Advantage of Tax Credits
In addition to lower prices, manufacturing in Mexico would enable BYD to take advantage of the new clean vehicle tax credit system in North America. The Inflation Reduction Act of 2022 has introduced changes to the tax credit system, providing incentives for clean vehicles produced in North America. By manufacturing in Mexico, BYD's electric vehicles could potentially qualify for these tax credits, depending on certain criteria.
However, there are concerns about Chinese-owned companies benefiting from these tax credits. Some organizations, such as the Alliance for American Manufacturing, have called for stricter regulations to prevent non-market economy companies like BYD from gaining preferential treatment in Mexico or Canada.
