Mexico's Electric Vehicle Leaders May Be Overthrown by Huge Tariff Proposal | Carscoops

      This year, BYD anticipates that its electric vehicle (EV) and plug-in hybrid electric vehicle (PHEV) sales in Mexico will more than double compared to the previous year.

      BYD captured 50% of Mexico’s EV and plug-in hybrid market last year.

      New regulations could impose significant tariffs on vehicles from China, India, and South Korea.

      General Motors, Ford, and Stellantis would be exempt from these tariffs, a development likely to please Trump.

      Mexico is contemplating a substantial new tariff that could transform its automotive market for several years, suggesting a 50% tax on vehicles imported from countries lacking free trade agreements. Notably, this list includes China, meaning this measure could significantly impact the rapidly growing company BYD, and even influence Tesla, especially as electric vehicle sales in Mexico start to gain traction.

      The tariff proposal, revealed last week, would not only affect electric vehicles but also traditional combustion engine cars from countries without trade agreements, including South Korea and China—both major players in the automotive sector—alongside India, Indonesia, and Russia, which have a smaller or more regional influence. Interestingly, American manufacturers would not be affected.

      Automaker Concerns

      Analysts warn that this new tariff could hinder BYD’s swift growth in Mexico. Eugenio Grandio, president of the Electric Mobility Association in Mexico, remarked, “It’s definitely a game-changer. Fifty percent is a very aggressive number.”

      According to Reuters, the tariff proposal still needs approval from Mexico’s Congress before it can take effect. General Motors, Ford, and Stellantis will avoid the new duties due to their manufacturing facilities in Mexico, allowing them to import a portion of their vehicles tariff-free. Meanwhile, BYD and Tesla have both explored establishing factories in Mexico, but these initiatives have not progressed thus far.

      Tesla Has Solutions

      Tesla’s operations in Mexico have largely relied on its Shanghai factory, which has produced all Model 3 and Model Y vehicles sold there since mid-2023, noted Salvador Rosas from the Tesla Owners Club in Mexico, as reported by Reuters. Nevertheless, analysts believe the company has a safety net with local inventories that may provide flexibility to divert supplies from other facilities, including those in the United States.

      BYD’s Plans in Mexico Stalled

      Earlier in 2023, BYD announced intentions to construct a new car manufacturing plant in Mexico. However, these plans were abandoned earlier this year following pressure from Mexican officials who were concerned that approving such a factory could harm trade relations with the United States and potentially irritate President Donald Trump.

      Despite the challenges, BYD has seen tremendous growth in Mexico in recent years. Last year, the company sold around 40,000 vehicles in the country, representing nearly half of the total EV and plug-in hybrid sales nationwide. This upward trend has continued into this year, with sales projected to double again.