Nearly 40 Chinese electric car brands enter Mexico

张工工

Nearly 40 Chinese electric car brands enter Mexico: Like China 20 years ago, "opportunities are everywhere"。

If you don't go overseas, you'll be out of the game. This is the realistic choice facing many Chinese companies at present. As for the direction of going overseas, in addition to neighboring Southeast Asia, Mexico has become a hot spot for Chinese companies to flock to in the past two years.

The connection between China and Mexico is becoming more and more frequent: China has been Mexico's second largest trading partner in the world for many years, and Mexico has also become China's second largest export country.

Public data shows that in 2023, China-Mexico bilateral trade hit a new high, exceeding US$100 billion for the first time. Data from the General Administration of Customs of China showed that in the first five months of this year, China-Mexico trade reached US$43.6 billion, a year-on-year increase of 10.64%.

Among them, Mexico's demand for Chinese cars has grown very rapidly. Data from the General Administration of Customs of China showed that in 2023, China exported more than 5.22 million cars, ranking the world's largest exporter. Among them, Mexico imported 415,000 cars from China, rising to China's second largest car export market.

Data from the Mexican Ministry of Economy showed that in 2023, 20 Chinese auto brands including BYD, JAC, and Geely sold nearly 130,000 vehicles in Mexico, a year-on-year increase of 63%. The local market share of Chinese cars has risen from 9.6% in 2019 to 18% in 2023.

Chinese automakers have also flocked to Mexico to invest. Public information shows that after BYD announced plans to invest $600 million in Mexico to build a factory this year, Dongfeng Motor recently opened 35 dealerships in Mexico and plans to invest in an auto parts factory in Mexico by 2025.

Daniel Dominguez Cantu, Acting Consul General of the Mexican Consulate General in Guangzhou, is not surprised by the increasing interest of Chinese companies in Mexico. He recently told Tencent News "Qianwang" in Shenzhen that the most direct reason for the rise of trade between China and Mexico and Mexico's becoming a hot spot for Chinese companies to go overseas may be the influence of geopolitics, and the direct result is that the United States' imports from Mexico will exceed China for the first time in 2023, and Mexico will become the largest source of imports for the United States for the first time.

Behind this phenomenon are more and more companies, including China, "borrowing" Mexico, the back garden of the US market, and targeting the North American market including the United States. With the United States increasing tariffs on Chinese electric vehicles, lithium batteries, photovoltaics and other industries in May this year, Mexico may become more and more valuable to many Chinese companies.

Next, this may further increase the enthusiasm of Chinese companies to go overseas to Mexico, including trade with Mexico and investing in Mexico to build factories.

However, data from the Mexican Ministry of Economy showed that foreign direct investment (FDI) in the first quarter of this year was about US$20.3 billion, a record high, of which more than 50% came from the United States, and China did not enter the top 10.

Daniel told Tencent News "Qianwang" that most of China's investment in Mexico is concentrated in the manufacturing and automotive industries. As far as he knows, China's direct investment in Mexico this year will be much more than US$151 million in 2023, and there will be a lot of growth in the foreseeable future.

Daniel has been working in the Guangzhou Consulate since 2019 and has also witnessed Chinese companies going overseas to Mexico in the past few years. He described himself as the organizer of Mexico's "investment roadshow" in China.

As of the first half of this year, he has assisted delegations including but not limited to the Mexican state of Puebla in arranging itineraries to China to attract investment. He told Tencent News "Qianwang" that these government delegations are very fond of the science and technology enterprises in the Greater Bay Area, and every time they come, one of their stops is Shenzhen.

"Mexico now is like China more than 20 years ago, everything is just beginning. For Chinese businessmen, there are opportunities everywhere, whether it is manufacturing or the automotive industry." Daniel told Tencent News "Qianwang" that for Chinese companies, in addition to targeting the US market, the local market in Mexico is also a good opportunity.

The following is an exclusive conversation between Tencent News "Qianwang" and Daniel, with slightly deleted content.

"These companies need to target the US market"

Tencent News "Qianwang": Mexico has become an important destination for Chinese companies to go overseas. What do you think are the reasons behind this?

Daniel: The first reason, which is also an important reason, is that Chinese companies' customers are in the United States, and these companies need to target the US market. Mexico is very close to the United States and is the backyard of the US market.

More importantly, Mexico has a free trade agreement with the United States and Canada (Note: United States-Mexico-Canada Agreement). According to this agreement, products produced locally in Mexico can be exported to the United States and Canada tax-free, which is why many Chinese companies choose Mexico when going overseas. These Chinese companies build factories in Mexico and produce products. If they are exported to the United States, the profits are still very substantial.

However, the electric vehicle industry is relatively special. Under this agreement, some other requirements need to be met, such as workers' hourly wages must not be lower than a certain number (Note: workers' wages are set at $16 per hour). After meeting some conditions, electric vehicles produced in Mexico are very easy to export to the United States and Canada, which is why many Chinese companies have chosen to go to Mexico when going overseas in recent years. I believe that more Chinese electric vehicles will build factories in Mexico in the next few years.

Another reason is Mexico's own advantages, including its geographical location and natural environment. Mexico has 130 million people, which is also a large market in itself, and local consumption is gradually increasing. Now some Chinese e-commerce companies have landed in Mexico, and these e-commerce platforms ship Chinese products to Mexico to meet the needs of the local market. And, for example, the largest local e-commerce platform company Mercado Libre, most of the products on this platform come from China. Because China is a super large factory, its products are good and cheap, which is very attractive not only to Mexico, but also to the whole world.

In addition, Chinese companies choose Mexico when going overseas because Mexico is the best place for companies to expand the Latin American market. Mexico is located in the core position of Latin American countries, which is also very important. All Latin American countries have opened routes with Mexico, such as direct flights from Mexico to Panama, Colombia and Argentina.

Tencent News: The USMCA you mentioned just now will face a three-way renegotiation in July 2026 to decide whether its validity period will be extended for 17 years. Will this bring uncertainty to Chinese companies going to Mexico?

Daniel: Yes. At that time, the three parties (note: the United States, Mexico and Canada) will sit down to negotiate and analyze the agreement, review the existing terms in the agreement, and see which ones need to be adjusted and whether it can be extended for another 17 years. The specific results depend on which parts of the agreement can be changed and how to adjust them. If there are changes, the three parties will come up with a new agreement. For ourselves, we hope to keep the agreement as it is.

Although the outside world believes that the US presidential election in November is very important, it may affect the renegotiation of the agreement. However, as I said just now, negotiations take time. If possible, Mexico will continue to provide some incentives to Chinese companies and hope that they will continue to come to Mexico.

Mexico is replicating the "Nueva León Model"

Tencent News "Perspective": What is the current situation of direct investment by Chinese companies in Mexico?

Daniel: During 2023, the direct investment (FDI) of Chinese companies in Mexico is US$150 million, which accounts for a small proportion of Mexico's FDI, but we have seen that China's investment in Mexico will increase significantly in the near future. For example, BYD plans to build a factory in Mexico with an investment of about US$1 billion. This is a very large investment and is very positive for us.

My team and I are partially involved in the promotion of this project.

Tencent News "Perspective": Specifically, what part of the work did you participate in?

Daniel: We have been in contact with this project since the BYD management team had the idea of ​​going to Mexico. My team and I helped arrange some meetings with local government agencies and arranged some other local activities. After they connected, we did not participate in the subsequent things.

The BYD project is a very good thing for Mexico. This project will drive some small and medium-sized companies to flow into Mexico, and will also drive companies in the electric vehicle supply chain to go there.

In fact, not only BYD, but also other Chinese companies will help arrange for going to Mexico. At the same time, when Mexican officials visit China, including when they visit BYD companies for exchanges, our team will also provide some assistance to the best of our ability. In the past May, we also assisted some Mexican government delegations in some activities in Shenzhen.

We are more like a roadshow underwriter for Mexico in China, and we need to cooperate and assist the Mexican government team in some activities within the jurisdiction at any time to attract more Chinese companies to invest in Mexico. (Note: The Mexican Consulate in Guangzhou covers Guangdong, Guangxi, Hunan, Hainan, Jiangxi and Fujian)

This year, there has been a wave of Chinese companies going overseas, and more Chinese companies are interested in Mexico. My work this year has also been very busy, especially the companies in Shenzhen are very enthusiastic, and I come to Shenzhen very frequently. Now Chinese companies are too enthusiastic about going overseas. Going overseas is something that is happening all over China, not just companies in the Greater Bay Area of ​​Shenzhen and Guangzhou, but I heard that many companies in the north are also interested. What I know is that some companies in Fujian and Hunan are also very interested.

These companies want to flock to Mexico because it is a key place for them to enter the US and Latin American markets. The Mexican government is also very aware of this, and there may be more policies targeting this trend.

Mexico today is very similar to China more than 20 years ago. Everything is just like it was at the beginning, and it is thriving. For Chinese businessmen, Mexico is full of opportunities, whether it is manufacturing or the automotive industry.

More than 20 years ago, the Chinese market was open to European and American companies, attracting them to come, and the latter did not necessarily bring the most cutting-edge technology. However, after decades of development, China has not only developed a booming economy, but also achieved a leap in the field of science and technology. Now China's science and technology industry is developing very well.

China's economy has taken off in the past few decades, and this situation will also happen in Mexico in the future. We will also slowly have higher technology in technology because of the arrival of Chinese companies. At the same time, Mexico's economy will develop as rapidly as China's economy after the reform and opening up in the past few decades.

I am from Nuevo León, Mexico. I have witnessed the prosperity of this state due to the arrival of Chinese companies, including a series of companies such as Lenovo in China, which have invested in the local area. This state has attracted the vast majority of Chinese investment and is called the "Nuevo León Model".

Tencent News "Periscope": Why can this state attract more Chinese companies?

Daniel: Because this state has a lot of land and good natural conditions. The most special thing is that this state is on the US-Mexico border. There are many American companies and factories here. Now Tesla is also going to build a factory here. Tesla's supply chain companies will also be established locally, including some Chinese Tesla supplier companies.

There is also an interesting business phenomenon in Nuevo León. For example, an industrial park in this state was established and managed by Chinese. (Note: Huafushan Industrial Park belongs to the Chinese company Huali Group)

The governor of this state is very active. He has come to China for roadshows many times, and I have also assisted him in many activities in China. Many officials from other states want to copy the model of Nuevo León and come to China for roadshows. Interestingly, this year we assisted delegations from four or five states in investment roadshows in China, including the delegation from Puebla. (Note, Puebla is the fourth largest city in Mexico) Some state officials must stop in Shenzhen when they come to China, and they don't necessarily have to go to Guangzhou.

"The electric vehicle industry is just starting in Mexico, and there are many opportunities"

Tencent News: Public information mentioned that more than 12 electric vehicle companies and 36 brands have entered Mexico?

Daniel: Yes. Now many Chinese companies come to Mexico to build factories. We hope that the USMCA can maintain the status quo and continue to be effective, so that more Chinese companies can continue to come to Mexico. Chinese companies are very good at research and development. They build factories in Mexico and bring new technologies and techniques - this is a new thing for Mexico, especially for local engineers. Most of these engineers are young people who have just graduated from college. They can learn a lot from Chinese companies, especially in the electric vehicle industry. Now, the electric vehicle industry has just started in Mexico and there are many opportunities.

For example, Sonora Plan (Sonora State Plan, Mexico), a project initiated by the current President Andrés Manuel López Obrador, involves new technologies, green energy and electric vehicles.

Sonora is a state in northwestern Mexico, adjacent to the United States, with very good natural conditions, long sunshine hours, and a lot of lithium - this is very important for the electric vehicle industry. This place will become the next electric vehicle industry center in Mexico. No Chinese electric vehicle company has landed there yet.

Tencent News "Qianwang": In the past period of time, which Chinese companies that want to build factories in Mexico have you contacted?

Daniel: We have contacted some. For example, we have talked with a Chinese electric car company in Guangzhou. They want to invest and build a factory in Mexico. We hope that in the near future, they can build a factory and settle down there and produce electric cars locally. Unlike the development speed of China's electric car industry, the current Mexican electric car industry has just started. This means that Chinese electric car companies will have great opportunities in Mexico. Therefore, I think Chinese electric car manufacturers go to Mexico not only for the US market, but also want to explore the local Mexican market, and the latter has great opportunities.

Tencent News "Qianwang": When you talk to these Chinese companies, what are they most concerned about investing in Mexico?

Daniel: They are very interested in expanding new business in Mexico, especially building factories. This is because if finished Chinese cars are exported to Mexico for sale, the local tax is very high. If these manufacturers build factories and produce electric cars locally, and then export them for sale, there will be no tax.

As for the Chinese automakers we have contacted, they are aware of building factories locally, rather than simply exporting cars to Mexico. This is a very positive signal.

Tencent News "Qianwang": What incentives does the Mexican government have for Chinese companies?

Daniel: Quite a lot. For example, Mexico routinely provides Chinese manufacturers with 2 years of tax exemption, which is for factories, especially electric vehicle factories. In addition, the Mexican government will also provide some water and electricity fee reductions for Chinese manufacturers. (Note: Water and electricity in Mexico are relatively expensive, about 4-10 times that of Shenzhen)

Tencent News "Qianwang": In the field of electric vehicles, according to the US-Mexico-Canada Agreement, even if Chinese electric vehicle companies build factories in Mexico, they require workers to earn $16 per hour, which is not low. For these companies, including water and electricity costs, the overall cost in Mexico will increase.

Daniel: This is a fact. The minimum income requirements for workers and the cost of water and electricity have indeed increased the costs of these Chinese companies. However, we will use other incentives to cover these additional costs and reduce their overall costs.

Tencent News "Qianwang": When you contact these companies that want to go to Mexico, what are they most worried about?

Daniel: Mexico has many opportunities, but of course there are also many risks. These Chinese companies are most concerned about local laws and regulations. The advice I often give them is that, like developing all overseas markets, when going to Mexico, Chinese companies need a suitable lawyer or a cooperative law firm. These professional institutions or lawyers will provide professional advice to better comply with local laws and regulations. This is very, very important. If you find a suitable lawyer, it will reduce a lot of trouble for companies going overseas, and the risks will naturally be almost gone.

Tencent News "Qianwang": Over the past decade, China and Mexico have maintained a very good relationship. In a few months, the new Mexican government will take over. What does this mean for Chinese companies going to Mexico?

Daniel: I personally think that Chinese companies don't need to worry. On the contrary, I think the best era is coming. The new president is a female scientist, she is very smart, and I believe she will make good decisions on Sino-Mexico relations.

In May, China Southern Airlines launched a direct flight from Shenzhen to Mexico, which indirectly shows that the connection between China and Mexico will become more frequent, and it will be more convenient to go to Mexico, so there will be more and more opportunities for both sides. For Chinese companies, Mexico is a market that has just begun, and now Mexico is a market full of opportunities.