The BJ40 is one of the models BAIC sells in Mexico, with prices starting at 571,900 pesos. The BJ40 is one of the models BAIC sells in Mexico, with prices starting at 571,900 pesos.

Chinese auto maker preparing to build US $2-billion plant

BAIC vehicles are only assembled here, leaving them subject to a 21% tariff

Chinese auto maker BAIC is preparing to announce a US $2-billion investment to build a plant in Mexico, according to company sources.

The unnamed sources told news website Expansión that the plan could be made public as soon as next month and is designed to make the car manufacturer’s prices more competitive in Mexico as well as Central and South America.

The company currently uses a production line in a Veracruz facility operated by Mexico-based AT Motors for the final assembly of the vehicles it sells in the domestic market.

But because none of the manufacturing process is completed in Mexico, each BAIC vehicle pays a 21% import tariff.

The operations director for Grupo Picacho, which markets the Chinese cars in Mexico, told Expansión that by moving the entire manufacturing process to Mexico, significant savings will be made and prices will drop.

“With this we believe that we can reach 4% [tariffs] . . . in the segments we participate in: compacts, SUVs and all-terrain vehicles,” Samuel Echeverría said.

The company first entered the Mexican market in the middle of 2016 and has since sold 1,700 vehicles.

The company sources said that eight states — Sonora, Coahuila, Nuevo León, Puebla, Hidalgo, Guanajuato, Yucatán and Quintana Roo — are competing to win the investment.

Echeverría explained that a variety factors including logistical convenience, plant accessibility for local suppliers and incentives offered by state governments will ultimately determine which state is chosen.

“One of the requests that BAIC International is making . . . is to be able to offset the tariff with some tax extensions while the plant is being built,” he said. “Some states have taken the lead on offering different tax incentives,” Echeverría added.

Once the plant is operational, the company will be able to import a quota of cars to Mexico duty-free dependent on the number of vehicles it manufactures locally.

Source: Expansión (sp)

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