BYD Auto manufacturing plant in Thailand assembly line
BYD, the world’s leading electric vehicle (EV) manufacturer, is pushing forward with its ambitious plans to establish a manufacturing plant in Mexico, signaling a significant move in the global EV landscape. Despite looming tariffs threatened by US President-elect Donald Trump, BYD’s commitment to Mexico underscores a strategic vision that extends far beyond simply accessing the US market, even though the United States remains the largest consumer of vehicles produced in Mexico.
While potential trade barriers could indeed limit BYD’s immediate access to the US, the company’s presence in Mexico represents a much grander strategy. It’s about leveraging EVs as a key to integrate deeply into Mexico’s essential infrastructure and establish a long-term foothold in the burgeoning North American EV market.
Investing in Mexico’s EV Infrastructure: A Necessary Step
BYD’s ambitious expansion in Mexico, aiming for a sixfold increase in auto sales, presents a considerable challenge to the country’s still-developing EV infrastructure. Mexico currently has fewer than 3,000 public charging stations, a number far from sufficient to support a significant surge in EV adoption. Experts estimate that Mexico needs to invest a substantial $1.73 billion annually in charging infrastructure over the next six years just to keep pace with projected demand.
Chinese companies, with their extensive experience in rapidly building renewable energy infrastructure, are stepping in to fill this gap, recognizing a strategic opportunity to expand their influence within Mexico’s critical infrastructure sectors. BYD, along with its partners, is actively involved in deploying EV chargers across Mexico to support the growing number of Chinese EVs on Mexican roads. Vemo, a Mexican cleantech firm, is collaborating with BYD to significantly increase the availability of BYD-compatible chargers, aiming to double the current number to 1,000 by 2025.
Furthermore, Mexico’s existing power grid is already facing energy deficits, and the increasing demand from EVs will only exacerbate these challenges. This is where the strategic involvement of Chinese companies becomes even more apparent. Notably, in November 2020, China’s State Power Investment Corporation (SPIC) acquired Zuma Energia, a Mexican renewable energy company. Zuma Energia has since become the second-largest private renewable energy producer in Mexico and is actively participating in the development of fast-charging facilities, energy storage solutions, and solar panel deployment. As of September 2024, SPIC’s investments in Mexico exceeded $1 billion, with clear intentions for further expansion within the country’s energy sector.
Mexico’s Potential Gains and BYD’s Competitive Edge
For Mexico, attracting companies like BYD to establish manufacturing facilities offers considerable benefits. These investments can generate high-paying jobs, bolster Mexico’s export industries, and attract further foreign investment. Jorge Vallejo, BYD’s general director in Mexico, has stated that the new EV plant is projected to create approximately 10,000 new jobs within Mexico.
Currently, the high cost of EVs puts them out of reach for many Mexican consumers. For example, the most affordable Tesla model in Mexico is priced around $40,000. However, localizing EV production in Mexico, as BYD plans to do, could significantly reduce prices by cutting down on transportation costs and potentially mitigating the impact of import tariffs.
Mexican automakers are already feeling the competitive pressure from BYD. The BYD Song model, a plug-in SUV priced around $30,000, is gaining ground against its competitors in the Mexican market. A local manufacturing plant would further enhance BYD’s competitive pricing, potentially making EVs more accessible to a wider segment of the Mexican population.
Beyond EVs: BYD’s Broader Cleantech Ecosystem Strategy
However, viewing BYD solely as an EV manufacturer overlooks the company’s broader strategic ambitions. BYD operates as a multifaceted technology company with the capability to rapidly integrate itself into a country’s energy system. Its strategy extends beyond simply selling EVs; BYD aims to become a comprehensive provider within the cleantech industry, potentially displacing existing competitors across various sectors.
Following a pattern observed in Brazil, BYD’s entry into Mexico with EVs is likely just the initial phase. Subsequently, BYD tends to offer a complete ecosystem to support EV adoption, including manufacturing logistics software, charging infrastructure, energy storage solutions, and renewable energy generation.
BYD’s diverse portfolio encompasses far more than just automobiles. It possesses in-house chip-making capabilities and develops advanced artificial intelligence (AI) programs. The company manufactures batteries, trucks, skyrails (monorail systems), energy storage systems, digital logistics management software, communication equipment, and 5G and AI technologies. This extensive expertise enables BYD to vertically integrate itself into a nation’s energy infrastructure, positioning it to dominate significant portions of the green economy.
In Brazil, where Chinese brands have already captured a 9 percent share of new car sales, BYD’s activities are diverse and deeply embedded in the energy sector. BYD builds electric buses, operates solar farms, supplies railway cars, partners with lithium mining companies, and manufactures consumer EVs. For BYD, EV production serves as a strategic entry point to gain access to and influence broader energy infrastructure, potentially creating a dependency on Chinese technology and investment to sustain the very industries that Chinese companies are instrumental in establishing.
China’s overall footprint in Mexico’s energy system is expanding rapidly. In 2023 alone, Chinese companies announced infrastructure projects in Mexico valued at over $12.6 billion, focusing on sectors including EVs, mining, public transportation, container ports, and telecommunications. Furthermore, Ganfeng, a China-based mining company, has been engaged in a protracted dispute with the Mexican government regarding lithium mining rights in the resource-rich Sonora desert.
Geopolitical Implications and Strategic Considerations
BYD’s growing presence in Mexico coincides with increasing international scrutiny of Chinese companies due to concerns about unfair trade practices, supply chain vulnerabilities, and potential security risks. These concerns have led some Mexican states to reconsider tax incentives and resource concessions initially offered to BYD.
However, BYD’s close ties to the Chinese Communist Party (CCP) are a crucial factor to consider. Since the late 1980s, China’s “Go Out” policy has encouraged overseas investments to secure strategically important resources that are scarce domestically. BYD’s role in supporting the CCP’s economic objectives provides it with significant advantages in the increasingly competitive global automotive market. Substantial government subsidies, strong domestic policy support, and access to intelligence resources give BYD a competitive edge that has propelled it to become one of the world’s top-selling automakers.
BYD’s connections to the CCP extend beyond economic policy. The company actively supports China’s military-civil fusion strategy, integrating defense and civilian research to advance national goals. In 2019, BYD received a prestigious state award for its contributions to military technology and has established multiple military-civil fusion enterprise zones focused on defense industry research and development, aligning with directives from the Chinese military.
BYD’s founder, Wang Chuanfu, maintains close ties with the CCP, having held various political positions, including delegate to the People’s Congress of Shenzhen for a decade. This interwoven network between BYD’s leadership and the CCP highlights the deep political connections underpinning the company’s global expansion.
Moreover, BYD benefits from substantial government subsidies. In 2022, BYD received $2.1 billion in direct subsidies from the Chinese government, significantly exceeding the subsidies provided to other domestic manufacturers. These financial advantages fuel BYD’s global expansion efforts, particularly as some countries implement tariffs on Chinese EVs in response to concerns about Chinese influence.
BYD’s ascent to become the world’s largest EV manufacturer is not accidental. The CCP has explicitly encouraged BYD to “go out” and capture foreign markets, providing extensive support through military collaboration, financial backing, and generous subsidies. This close collaboration raises questions about the extent to which BYD’s corporate strategies are intertwined with broader Chinese government directives.
A Broader Geopolitical Game
BYD’s vertically integrated approach, encompassing everything from electric vehicles to renewable energy infrastructure, enables it to not only gain market share but also establish lasting influence over the systems driving Mexico’s clean energy transition. This strategic positioning offers significant geostrategic advantages for Beijing.
China’s expansion into Mexico’s EV market, spearheaded by BYD, is more than just a response to growing local demand for affordable electric vehicles. It is a component of a larger strategy to embed Chinese influence within Mexico’s broader energy and infrastructure systems, representing a more profound geopolitical maneuver.
Mexico’s demand for EVs is rapidly increasing, and BYD’s potential to dominate this market is undeniable. The swift vertical integration of Chinese companies into sectors crucial for EV adoption could make Mexico increasingly reliant on China for essential energy and industrial systems.
As Mexico seeks to capitalize on the EV boom, policymakers must carefully consider the long-term trade-offs associated with Chinese partnerships. While BYD offers immediate economic benefits, Mexico risks relinquishing control over strategic assets and becoming overly dependent on Chinese technology and investment.
For Mexico to achieve sustainable and independent growth in the cleantech sector, it must strike a balance between international collaboration and strengthening its own domestic capabilities and regulatory oversight.
Haley Nelson is assistant director at the Atlantic Council Global Energy Center.
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EnergySource
EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.
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Image: BYD Auto manufacturing plant in Thailand. (iMoD Official, Wikimedia Commons) https://commons.wikimedia.org/wiki/File:BYD_Auto_(Thailand)_Co.,_Ltd._manufacturing_plant_assembly_line.png
