MotorTrend Investigates: China's Big Bet On Mexico
MotorTrend editors Miguel Cortina and Kristen Lee take an in depth look at China's push in to the Mexican market.
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00:00 (rock music)
00:02 - Everyone has something in their house
00:09 that was made in China, but what about a car?
00:11 Specifically, a Chinese-made EV.
00:14 They absolutely do exist, and what's more,
00:17 they've already landed in North America
00:18 to great popularity.
00:20 - China is the biggest car market in the world,
00:22 and we've landed here in Mexico City
00:24 to check out Chinese-made cars by Chinese automakers,
00:26 and also answer a few questions along the way.
00:29 Should American buyers have something to look forward to?
00:31 And should American automakers
00:33 have something to be afraid of?
00:34 There's a lot of talk as to when a Chinese car
00:44 from a Chinese OEM will make it to the US,
00:47 but they've already landed here in Mexico in full force.
00:50 - So China already has a very strong
00:51 domestic automotive market, and Chinese-made EVs
00:54 are actually more popular there
00:55 than some legacy American automakers
00:56 like Lincoln or Cadillac.
00:58 Over the last three years, nine Chinese automakers
01:01 have made it here in Mexico.
01:02 Some of them are really well-established players
01:04 like BYD and Chery, and more are on the way.
01:08 - 2022 was actually the first time
01:10 that China surpassed the US
01:12 in supplying Mexico with light vehicles.
01:14 So to get to the bottom of all of this,
01:16 we've assembled experts in the form of journalists,
01:18 executives, analysts, and an economist
01:20 to figure out why exactly Mexico
01:22 is such a hot market for China,
01:24 and also to drive a couple of those Chinese EVs.
01:28 - This isn't the first time
01:29 there have been Chinese-branded cars outside of China.
01:32 - There are five Chinese auto manufacturers
01:34 at this year's Detroit Auto Show.
01:36 - Back in 2008, Chinese brands like BYD and Geely
01:39 came and showed off their stuff at the Detroit Auto Show,
01:43 but they didn't exactly leave everyone
01:45 with the best impression.
01:46 - This car raises an important point
01:49 about all these Chinese companies,
01:51 whether it's the one that plans to introduce cars
01:54 here in late 2008 or plans to be here in three to five years.
01:58 Will any of these cars meet US safety and emissions standards?
02:01 I'm guessing this one won't.
02:03 - If you remember, like, 15 or 20 years ago,
02:07 when the first Chinese brands started to produce cars
02:10 and presented in Detroit Auto Show, for example,
02:12 it was like, "Really? Do you think this is a car?"
02:16 - These are Hector Ocampo and Gabriel Salazar,
02:19 automotive journalists based in Mexico.
02:21 They've been covering the Mexican automotive industry
02:23 and have witnessed the influx
02:25 of Chinese automakers in Mexico.
02:27 - 10, 15 years ago, you said like,
02:29 "Oh, what, that car is a copy of this,
02:32 and it is a very crappy car."
02:34 - The poor taste that a Chinese automaker
02:35 left in everyone's mouth wasn't totally unwarranted.
02:39 In 2008, a Chinese state-owned car company called FAW
02:43 touched down in Mexico through an importer.
02:46 To make a long story short, the quality was pretty bad,
02:49 and ultimately, FAW gave up on its plan in Mexico
02:52 and departed with poor perception
02:54 of Chinese products in its wake.
02:56 Cesar Roy, an industry analyst
02:58 with more than 45 years of experience, has more insight.
03:02 (Cesar speaking in foreign language)
03:07 (Cesar speaking in foreign language)
03:11 - So, "Echo en Chino" is "malo."
03:25 (Cesar speaking in foreign language)
03:29 (Cesar speaking in foreign language)
03:33 - Based on what he said, the Chinese automakers
03:58 seem to have gone through a pretty significant glow-up.
04:01 We want to experience this for ourselves, though,
04:03 so we're getting behind the wheel of a BYD REN+,
04:06 an all-electric compact SUV with almost 300 miles of range
04:10 from the largest PHEV and EV maker in the world.
04:15 - Quality-wise, it's pretty good.
04:17 - Yeah, yeah, I think it is.
04:18 I'm totally on board with all of the things
04:22 that I can touch here,
04:23 and everything else about the car has been so impressive.
04:27 Even the way it looks.
04:29 You know, you walk up to it, you're like,
04:30 "This is actually pretty neat."
04:32 It doesn't look like everything else that's on the road.
04:35 It is stylish, and I think it's proportioned nicely, too,
04:39 frankly.
04:40 - I came here to Mexico City with a blank sheet, right?
04:45 I didn't know what to expect.
04:48 And after driving it a couple of hours, or one day,
04:51 I was like, "You know what?
04:52 "I can see myself actually owning this car."
04:56 - Yeah, yeah, absolutely.
04:58 If you've been paying attention,
04:59 the quality of products coming from
05:00 certain Chinese automakers has skyrocketed,
05:03 seemingly overnight, and to the point where
05:05 they can legitimately rival those from American automakers.
05:09 It all invites the question, how the hell did this happen?
05:13 Well, during the pandemic, the Chinese government
05:15 told its automakers and battery companies
05:17 to focus on lithium battery development, EVs,
05:20 and plug-in hybrids, basically new energy vehicles.
05:24 At the same time, the government also installed
05:26 thousands of charging stations all across China,
05:28 and offered its citizens big, giant,
05:30 massive incentives to buy EVs.
05:32 The result is astonishing.
05:35 China went from having EVs and plug-ins occupy
05:38 a 5% market share before the pandemic,
05:40 to 35% in May of this year.
05:43 Naturally, these automakers want to keep growing,
05:46 and are taking big steps into new markets around the world.
05:49 Enter Mexico.
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06:05 That's Guillermo Rosales, the head of AMDA,
06:32 Mexico's dealer association.
06:34 Besides bringing competitive products to Mexico,
06:36 he says Chinese automakers also have two other aces
06:39 up their sleeves.
06:41 They have wide availability during the semiconductor
06:43 shortage, and their pricing strategy currently
06:46 undercuts the competition.
06:48 Undercuts it a little bit.
06:49 It undercuts it.
06:50 Just enough for a buyer to say, hey,
06:54 maybe I should consider that one instead of the Honda.
06:57 [SPEAKING SPANISH]
06:59 Yeah, OK.
07:00 OK.
07:01 One of the Chinese car brands that recently launched
07:03 in Mexico with an aggressive pricing strategy is BYD.
07:07 The RAM+ compact crossover WeDrove, for instance,
07:09 is cheaper than a Honda CR-V hybrid in Mexico.
07:12 And later this year, BYD plans to bring the Seagull,
07:15 its most affordable EV, which retails for around $12,000
07:19 in China.
07:20 BYD's presence in Mexico isn't huge just yet,
07:22 but it seems like that could change pretty quickly.
07:25 We can provide the very competitive EV
07:29 in the similar price range of the internal combustion engine
07:32 vehicles.
07:33 So far, we only have three models.
07:35 But by the end of September, we will launch another two models.
07:41 You will see the surprise price we will
07:45 offer to all the consumers.
07:48 And it will make the EV more affordable to everyone.
07:53 Our time in the BYD UMP+ showed us a quality, luxury-focused
07:57 product.
07:58 But what about something on the more affordable side
08:00 of the spectrum?
08:02 Another Chinese automaker called JAC,
08:04 which arrived to Mexico in 2017, sells the most EVs in Mexico.
08:09 While the number of units is small right now,
08:11 the opportunity is big.
08:13 For example, the all-electric JAC E10X
08:16 is cheaper than any hybrid available in Mexico.
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08:54 JAC was the first Chinese automaker
08:55 to assemble its passenger cars in Mexico
08:58 by bringing parts from China for final assembly.
09:01 Other Chinese car brands are following that plan,
09:03 including CHERRY, a state-owned Chinese automaker.
09:07 Brian Wu, the executive vice president
09:09 of CHERRY Mexico, which sells under the name CHI-DAY,
09:12 said the company is looking to build a 400,000 vehicle plant
09:16 where they plan to make EVs.
09:18 Do you expect to build EVs, electric vehicles,
09:21 here in Mexico?
09:22 Sure.
09:22 Yes.
09:23 Yes.
09:24 This must be the plan, part of our plan.
09:27 Everybody knows that in the future,
09:29 the new EVs must keep the very important planning
09:34 in the market.
09:35 Of course, the Mexican market is a little slow.
09:37 But we talk about the USA, maybe this kind of market
09:40 sharing for new EVs is much more than here.
09:45 And that's exactly where Chinese automakers
09:47 want to go, the US market.
09:49 But the USA is almost similar to 20 million, right?
09:54 20 million.
09:54 So you say, of course, you can see
09:58 it's 20 times the market here in Mexico.
10:01 So of course, it's very, very important for us.
10:05 So we already have some of the rule of man
10:07 how to enter to the USA.
10:10 But speaking by today, I cannot say much more about our strategy.
10:18 The Chinese are looking at Mexico as the entry platform
10:22 to the United States.
10:24 It's a very well-rounded commercial logic,
10:29 because they, with the Free Trade Treaty with the United
10:32 States and Canada, are betting that the North American market
10:37 will open sooner or later.
10:39 The USMCA treaty agreement allows a foreign-built vehicle
10:42 to enter the US tax-free as long as 75% of its parts
10:46 are built in North America.
10:48 Additionally, President Biden's Inflation Reduction Act
10:51 also allows certain EVs built in Mexico
10:53 to qualify for up to $7,500 in tax incentives.
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11:34 It's an advantage Mexico is very eager to embrace.
11:37 According to the Mexican Secretariat of Economy,
11:40 Mexico received $397 million in direct investments
11:44 from China in 2022, up from just $86 million in 2020.
11:49 So it's pretty safe to assume Chery isn't the only automaker
11:52 that will build a plant in Mexico.
11:54 Other Chinese car companies like BYD and Saic Motors
11:57 are exploring the possibility.
11:59 So yeah, this week, as a matter of fact,
12:01 we met with the CEO of Saic Motors.
12:03 They manufacture for Volkswagen, Chevrolet, and MG.
12:10 And they have some impressive projects
12:13 of probably relocating a plant from China--
12:17 no, starting a new plant in Mexico
12:19 for manufacturing MG cars for the North American market.
12:22 That's Emmanuel Liu, Deputy Secretary
12:25 of Economic Development of Nuevo Leon,
12:27 a Mexican state located just south of the Texas border.
12:30 He's the one responsible for bringing Tesla to Nuevo Leon,
12:33 whose investments will include building a new gigafactory.
12:37 Do you think Nuevo Leon is going to get more EV investments
12:41 for EV production in the future?
12:43 I think so, yes.
12:44 I think we probably will have some Chinese companies start
12:49 doing EVs.
12:51 We're not allowed to say which one,
12:53 but we're in talks with several different companies
12:56 that are going to be producing EVs in short term.
13:00 So if Chinese automakers are looking
13:02 at building plants in Mexico in order to export to the US,
13:06 will America open its doors to Chinese car companies?
13:09 What is the over-under that a Chinese automaker will
13:14 establish itself in the US, like a Toyota, a Kia, a Hyundai?
13:18 Well, I think first they'll do it in Europe,
13:21 because it's already happening, and the Europeans
13:23 are more open to that.
13:25 And I think you'll start getting a wider range
13:28 of electric vehicles in Europe.
13:30 Some of them will be at relatively low prices
13:33 and smaller, and that's going to play well.
13:35 And so I think it might take a little bit longer for the US
13:39 to reconsider in some sense.
13:42 You're hearing from David Dollar, who's
13:43 a Brookings Institute foreign policy and economics
13:46 expert on the US and China.
13:48 He doesn't think a Chinese-made, Chinese-branded car
13:51 is coming to our market anytime soon.
13:53 If I were a Chinese manufacturer,
13:55 I would be worried that if they start having a lot of success,
13:59 the US may change the rules, basically.
14:03 So I guess I'm a little skeptical we're
14:05 going to see a lot of Chinese brands in the United States,
14:09 because there are just a lot of different ways the US can
14:12 prevent that.
14:13 EV prices in the US have decreased in recent months,
14:17 but they are still overall higher
14:19 than the average price of an internal combustion engine car.
14:22 With the US setting even more ambitious targets
14:25 toward clean energy vehicles, closing the door
14:28 to foreign EVs with competitive prices
14:30 could make achieving that goal difficult.
14:33 This creates a real dilemma for the United States.
14:36 So I understand President Biden wants
14:38 to stimulate good jobs as well as meeting
14:41 environmental targets.
14:42 But sometimes if you have two targets with one instrument,
14:45 it becomes very inefficient.
14:47 So probably the US will end up with expensive electric
14:50 vehicles because of this determination
14:53 to protect the domestic market.
14:55 And worldwide, we're probably going
14:58 to see continuing reductions in prices for new energy vehicles.
15:02 And the US risks being the odd man out,
15:06 trying to protect this domestic market
15:08 to create so-called good jobs.
15:11 But we may end up having a very partial transition
15:15 to the future, when other places are really
15:18 going to be transitioning to electric vehicles, new energy
15:21 vehicles.
15:22 That's a good phrase, actually.
15:24 All of this makes us wonder if these Chinese car companies are
15:27 risking too much by investing in plants in Mexico
15:30 when entrance into the US isn't even guaranteed.
15:32 But in that same vein, just because the US is a target
15:37 doesn't mean it's also the only destination.
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16:20 So if you were Ford, Stellantis, or Chevy,
16:24 would you be worried about the Chinese?
16:26 In Mexico, yes.
16:27 Yeah.
16:28 Very concerned.
16:28 And not only in Mexico, in a lot of markets.
16:30 But in Mexico, yes.
16:32 And some of them--
16:33 They are concerned.
16:33 They are concerned.
16:34 And some of them is like, there's nothing we can do.
16:38 So we came to Mexico to answer two questions.
16:41 The first is, what do American buyers
16:43 have to look forward to?
16:44 And the answer is, a lot.
16:46 Because these Chinese cars, we've driven them.
16:48 We've talked to people who make them.
16:49 We've talked to people who've been studying them
16:51 for a long time.
16:51 And there is so much that is coming, if it can.
16:54 I mean, the cars are quality.
16:56 They look good.
16:57 They drive really well.
16:58 And even price.
16:59 But the second thing that we need to answer
17:01 is, do American automakers, or even just automakers
17:04 in general, do they have anything to be afraid of?
17:07 The answer is yes.
17:08 It's an absolutely yes.
17:10 And now, the USMCA agreement allows Chinese automakers
17:14 to build a plant in Mexico, export to the US tax-free.
17:17 The stage is basically set.
17:19 It's just a matter of when that's going to happen.
17:21 Yeah, it's all political.
17:22 But I can almost promise you, if some of these Chinese cars
17:26 landed in the United States tomorrow,
17:28 there would be people willing to buy them.
17:30 There's people who are fed up with the system as it is now
17:32 and what's being offered currently.
17:34 So I think that's what the Chinese are betting on.
17:35 They're betting on people who are
17:36 willing to take a risk on something new, if it's good
17:39 and it's affordable.
17:40 So that's a lot to look forward to.
17:43 Thank you so much for watching this
17:44 and being a part of this Motor Trend investigation.
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