Baic, Chery, Changan and other domestic car companies have piled into Mexico, and A-share listed auto parts companies Topu Group, Xusheng Group, Bethel and Silver Wheel shares have also followed the footsteps of BMW, Tesla and other companies to build factories in Mexico, Mexico has become China's largest vehicle export market in Latin America. Analysts say the accelerated entry of Chinese manufacturing into Mexico has also really helped companies bring revenue growth. However, some analysts pointed out that the new US-Mexico-Canada trade agreement has made adjustments in favor of the United States, and it is still challenging for Chinese car companies to share this cake with Volkswagen, Nissan and other leading car companies.
Chinese automobile industry chain enterprises such as BAIC, MG, JAC, Chery, Jiangling, Changan have gone to Mexico in recent years to lay out production and sales in the local area. At least 10 more Chinese brands have announced their entry into the Mexican market in 2022 alone, and another 10 are expected to enter in the future, according to consultancy Yusseth. Some analysts said that one of the important reasons to attract many auto industry chain manufacturers to continue to land in Mexico is the proximity to potential markets. Products produced in Mexico, with lower transportation costs to the North American market, can also cover the South American market. In addition, Mexico also has rich reserves of lithium resources, which is the basic material for electric vehicle batteries. At present, Mexico has proven lithium reserves of 1.7 million tons, ranking 10th in the world.
With the construction of factories in Mexico by global auto giants, parts companies in the relevant domestic industrial chain are also facing the mandatory question of "going to sea". For example, Musk plans to produce a $25,000 next-generation entry-level electric car in Mexico, and in order to get on the Tesla ship, domestic supply chain companies have accelerated the layout of Mexican factories. According to the statistics in the research report of Cui Yan of Huaxi Securities on June 28, listed companies such as Tuopu Group, Xinquan Shares, Xusheng Group, Akedi, China Milk Shares, Bethel, Sanhua Intelligence Control, Daimei Shares, Silver Wheel Shares, and Shangsheng Electronics have mass-produced their own products in Mexico and supplied them to their partners nearby, speeding up the process of product globalization.
The accelerated entry of Chinese manufacturing into Mexico has also really helped companies bring revenue growth. At present, the cooperation between China and Mexico has been deepening, and Mexico has become the largest market for China's vehicle exports in Latin America. In 2022, the total trade volume between China and Mexico reached 94.965 billion US dollars, an increase of 9.8% year-on-year, showing that the economic structure of the two sides is highly complementary. Guillermo Rossles, head of the Mexican Automobile Dealers Association, told an automobile chamber meeting on Sept. 7 that cars from China accounted for 19.4 percent of Mexico's auto imports in the past eight months, up from 5.7 percent in 2018. The head said a rebound in inventories and faster delivery times have helped Mexico meet growing demand, with more competition among car brands in the Mexican market.
However, some analysts say that while Mexico has many advantages, it also has certain policy risks and market risks. It involves security, operations, infrastructure, labor, regulation and other aspects that can pose challenges for foreign investors. Although the potential of the Mexican market is huge, how to adapt and grasp this market is also a big challenge. Then there is the problem of brand power, Chinese cars have not yet formed a recognized brand potential energy overseas, and high-end is still in the water test stage. Although the domestic independent brand has long exceeded the joint venture brand, but in the Mexican market, it is still unknown.
It is also easy to overlook that the new US-Mexico-Canada trade agreement has been adjusted in favor of the United States compared with the old North American Free Trade Agreement. For example, on imported cars, the United States has set an annual export quota of 2.6 million vehicles for both Canada and Mexico. In other words, Chinese car companies want to share this cake with Volkswagen, Nissan and other leading car companies. However, they have been deep in the Mexican region for many years, and the roots are deeper. Some industry insiders pointed out that the United States is the world's second largest auto market, its importance is self-evident, but Chinese auto brands export to the United States has high tariffs and restrictions, and by virtue of the geographical proximity to the United States market and the advantages of free trade agreements, Mexico has become a new capital concentration of the automobile manufacturing industry, but also a new blue ocean choice for Chinese enterprises.
