The electric car market is highly competitive and companies from China in particular, such as BYD, backed by star investor Warren Buffett, which overtook the US electric car manufacturer Tesla as world market leader in the last quarter, are now also pushing into the European and US markets.
• Chinese electric car manufacturers want to enter the USA through the back door
• Mexico as a springboard to the US market
• Threat to US automotive industry “significant”
Tesla boss Elon Musk Sees Chinese electric car manufacturers like BYD posing such a great threat to their global competition that he even called for trade barriers for Chinese companies during a conference call with analysts as part of Tesla’s figures presentation. Without this, Chinese car companies would “practically ruin most other car companies in the world,” said Musk.
But it’s not just Musk, who as Tesla CEO is likely to see the Chinese competition as a direct threat to his company, who is worried about the automobile companies from the Far East that are pushing into the US market.
Mexico as a back door to the US market
The Alliance for American Manufacturing (AAM), a nonprofit, bipartisan partnership founded in 2007 by some of America’s leading manufacturers and the United Steelworkers, recently released a report titled “On a Collision Course: China’s Existential Threat to the American Auto Industry and It Way through Mexico”, in which she warns about the danger of Chinese imports coming to the USA via Mexico.
According to the AAM, Chinese automakers are rushing into Mexico to build large assembly plants there. In a press release accompanying its report, the organization points to an analysis by the Economic Policy Institute that found Chinese foreign direct investment in Mexico increased by 126 percent between 2018 and 2022. The majority of these investments flow into the automotive sector. And the Chinese cars seem to be popular in Mexico. According to AAM, Mexico is the second largest importer after Russia. However, vehicles manufactured in Mexico are largely destined for export – and the USA is the most important import market for vehicles manufactured in Mexico. And so the Chinese car companies building factories in Mexico would try to gain access to the US market through the back door.
While electric cars manufactured in China are subject to a tariff of 25 percent in addition to a tariff of 2.5 percent on imported cars – a total of 27.5 percent – Mexico is a member of the NAFTA successor agreement, the United States-Mexico-Canada Agreement (USMCA) with the USA and Canada, which grants vehicles from this area duty-free status if they meet certain requirements.
Chinese competition would threaten the US automobile industry
As the AAM writes in its press release, it would be “a serious mistake” to expose the U.S. automotive sector “to import competition from rivals that do not have nearly the same market conditions.” Chinese automakers have received financial and regulatory support “along the entire automotive supply chain” for years and have “plenty of cash” and “excess production capacity.” The organization warns that the threat posed by heavily subsidized Chinese imports is “significant” to the U.S. auto industry. There would be “job losses and capacity reductions”. The extent of the threat’s severity will “depend heavily on how federal policymakers respond to it.” In any case, the Alliance for American Manufacturing “believes that Washington should act to prevent this.”
The AAM therefore recommends to politicians, among other things, to further increase tariffs on Chinese automobile imports, to use the upcoming review of the USMCA in 2026 “to tighten the rules of origin for all automobile content” and to “fully implement and enforce the Uyghur law to prevent Forced labor with additional emphasis on metals, automotive parts, and battery contents and raw materials used in electric vehicles.”
Editorial team finanzen.net
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