One trend that we at Mexico News Daily are covering closely is the significant and accelerating amount of Chinese investment and its implications across multiple industries in Mexico.
Nearshoring trends are forcing companies across industries to “get more local”, and the Chinese are moving at the speed of light. The automotive industry is just the tip of the iceberg of Chinese investment coming to Mexico, and we have recently seen significant announcements from Chinese companies in industries as diverse as furniture, appliances, solar power plants, tires and construction equipment in just the past few months.
I have also written about this trend, and provided a basic framework on why it matters, and how to think about it.
Some recent news in the Mexican automotive industry should bring some urgency to the discussion.
Just a few days ago, we reported that sales of Chinese cars in Mexico were up 63% in 2023 and now represent nearly 20% of all cars sold in the country. This is a really big deal!
Also just days ago, another Chinese auto company announced a large investment in a new electric auto plant in northern Mexico.
Given that cars and auto parts make up the largest percentage of USMCA trade and are arguably the biggest success story of cross-border cooperation and integration of the agreement, the thought of such significant investment and growth of Chinese businesses into Mexico should be a major and concerning wake up call.
The Chinese investment up to this point has been primarily in the auto parts sector, but all indications are that car assembly plants will be coming soon to Mexico. Given the speed of investment and growth taking place, a few important questions should be considered.
How will other foreign car companies with investments in North America compete with the Chinese car companies? Will they begin to purchase more auto parts from newly localized Chinese companies in Mexico to stay competitive and disrupt their current supply chains?
This past year we saw a bitter strike between the UAW and the “Big 3” U.S. carmakers, which ended in significant increases in pay and benefits for workers. How will these companies that have plants in the U.S. and Canada be competitive with Chinese cars being made in Mexico?
Just this week, Elon Musk, the CEO of Tesla, said during the company’s quarterly earnings call that “if there are not trade barriers established, Chinese EV companies will pretty much demolish most other car companies in the world.”
How will politicians in the U.S., Canada and Mexico respond? Will the U.S. consider breaking or modifying the USMCA free trade agreement to raise tariffs on Chinese cars made in Mexico to protect American and Canadian UAW jobs? Will the U.S. and Canada allow Chinese cars made in Mexico to enter duty-free? Will Mexico somehow try to find a path to cater to both Chinese auto companies and U.S./Canadian politicians?
Mexico needs job creation and investment, but it is naive to imagine such significant Chinese investment will not cause serious relationship problems between Mexico and the U.S. and Canada in the future.
The USMCA leadership cannot let the issue of Chinese investment into Mexico set back or reverse a trade agreement that has done so much good for North America over the past three decades.
If politicians from all three countries don’t get out in front of this issue, and quickly, it’s hard to imagine it not causing serious trade issues and ultimately becoming a major political issue later in the year.
We need our leadership focused on making North American cooperation stronger and more comprehensive, not sidetracked and weakened by the disruption of Chinese investment. Understandably, the region has a lot of other major issues to manage right now, but this one is too important to ignore. Wake up North America!
Travis Bembenek is the CEO of Mexico News Daily and has been living, working or playing in Mexico for over 27 years.
The UAW needs to take note as well. They can only negotiate increased employee salaries and benefits with a strong US automobile industry. Wake Up UAW!
Agreed.
Spot on. This is major and it’s coming in the next few years. Once the Chinese companies have plants in Mexico that opens up their options to sell Chinese made cars in the US. And there is NO way that ford and GM will be able to compete with the quality and cost that will come out of those plants without significant trade barriers which will carry their own issues
How does Mexico move up the value chain once foreign industry is entrenched? For instance like Germany which develops the IP (analogous to China here) and retains much of production for export?
Appears North America has slept to long already. Hopefully not.
Agressive US politics leads to isolationalism leads to economic problems. The US will not be able to stand alone. The future is here.
Anyone know how use my email address rather than my full name when useing the comment section. Thank for anyones help
That’s a very good question David and I would like to know also. If MND wants some real participation it will allow incomplete names to be used.
1. Go to the profile information icon — it looks like a wheel and, from my interface, is in the upper right corner — and click it.
2. Your subscriber information appears. Look down the list a few information blanks and you’ll see “display name”.
3. When I did this, the system had my email address already entered. I simply changed it to my first name. You can change yours to your preferred display name.
Hope this helps!
Mexico is going to have to make major strides with its infrastructure to not only support the cars locals are buying but also to transport goods.
I was riding through Guadalajara today to Jocotepec for a Saturday motorcycle ride. 2 lane roads for 5 million people. No interchanges. Cars and big rigs dangerously cross or do u turns.
But beautiful blue sky and 26C weather!
Yep. This is completely true. Ha!
And where are all the manufacturing plants being built in the U.S. that Trump boasted he was bringing back to the U.S. with his high import tariffs? China, et. al. weren’t paying these tariffs, the import brokers here were footing the bill and passing the increased codt on to the consumer.
U.S. manufactures of the same and weren’t impacted by the tariffs simply increased their prices to match and make even higher profits.
Seems to me there is increased “near shoring” by foreign manufacturers and suppliers, but it ain’t in the United States to be closer to their markets.
Beware!
So the Chinese are coming. Is the issue they are making cars for sale in the US at lower prices? This is capitalism, right? Is the country of China unfairly supporting the business costs? Or is the problem ‘they’ are Chinese and we don’t trust their motives? That US companies can’t compete on price is a problem for whom? The politicians? But good for American car buyers? MND please dig deeper into the important questions that need to be solved. Like what happens when China invests so much, do they come back and ask to provide military-style ‘security’ for their investments ….just south of the US border?
Well thought out reply!
Of course, they’ll come back. Military style security for their investments is what the Chinese have in mind. We just have to pay attention to this and so does Mexico. I sure don’t like the sound of it.
Foreign investment in Mexico is good for Mexicans. It provides needed capital and jobs and secondarily contributes taxes for schools, hospital and roads. Cars made in Mexico are Mexican cars regardless of whether the factory is owned by Japanese, Chinese, Germans, Americans or some combination of investors. If for some reason the Chinese owners (or any other foreign investors) don’t play by the Mexican rules their factories can be expropriated. The future is bright for Mexico!
I agree John! Why would you have a different stand on foreign investment if it is from China? For years in North America we have had first a racist approach towards China and now paranoid fear of their industrial advancements. Trade with China in Latin America is very extensive in many countries and they do not only invest in factories but in many infrastructure development projects. I was recently in Bolivia and drove over 1750 km and the best roads were those built by Chinese companies. Most of their public transportation is now in Chinese vehicles. In Canada and the US we use Chinese items everyday. Why protect certain industries and not others?
USA wanted less dependence on China.
They make our medicines, and bullets.
The leverage to dictate their will is the issue Joe has overlooked.
Now, if China decides to not ship parts to USA, USA will suffer.
Thanks Joe, just protect your country and help Mexico, not china.
I don’t trust the Chinese. They already make low quality everything in China, import it, then they go back to that country and start buying real estate with that same money. They cheat their way to everything. They illegally manufacture others products, and that probably includes cars. Limit their investment or else before you know it they will own every real estate structure and company in the country.
Of course, they’ll come back. Military style security for their investments is what the Chinese have in mind, that’s their main goal. The U.S. has to pay attention to this and so does Mexico. I want the best for Mexico always, but don’t trust the Chinese to be honest and helpful in the end. Mexico must be aware of their schemes. The Mexican people don’t need further problems and it could turn out to be a disaster. Remember the Chinese don’t think nor act or live like Mexicans and they have no religion that I know of. I don’t know how it’s going to work but Mexico has to proceed with caution and make sure it’s the right way to go.
Maybe the Chinese can kill the Mexican mafias? jajajaja