Chinese EV makers’ Mexico plans spark fears in U.S.

But in the U.S., tariffs affecting China’s EV makers have made it nearly impossible for them to compete against vehicles made domestically or imported from friendly countries. That doesn’t mean they aren’t planning an assault, however: Chinese EV makers are instead focusing on another North American market, one that could prove to be a stepping stone into the U.S.: Mexico. 

South of the border, sales of affordable Chinese-made EVs are booming. According to the Mexican Association of Automotive Distributors, Mexico’s imports of Chinese cars (both EVs and traditional ones) increased 62.6% during the first eight months of this year compared to the same period last year.

The Mexico advantage

More worrying for U.S. automakers, several Chinese EV makers plan to build factories south of the border. That’s concerning because Mexico has a free trade agreement with the U.S. and Canada (the USMCA). Among the Chinese EV makers scouting locations in Mexico are BYD, Chery, and MG, reports the Financial Times.

Especially formidable is BYD, backed by Warren Buffett’s Berkshire Hathaway and poised to overtake Tesla as the world’s biggest EV seller. It owns the entire supply chain of its EV batteries, from the raw materials to the finished battery packs. Other Chinese EV makers have similar supply-chain advantages, to varying degrees, giving them a big cost advantage.

Earlier this month, the U.S. government, intent on building up the domestic EV supply chain, released new rules making it harder for vehicles with battery components made by a “foreign entity of concern”—meaning companies in China, Russia, Iran, or North Korea—to qualify for a $7,500 tax break granted to EV buyers under the Inflation Reduction…