China’s Auto Sector Is Moving to Mexico; 29 New Manufacturing Plants Set Up Since June 2022

The United States-Mexico-Canada (USMCA) Free Trade Agreement is fast becoming a free trade agreement for the world, whereas any multinational with a presence in Mexico can set up shop and make the U.S. its number one target. China is doing that now.

The auto sector is top of mind for the Chinese. They know that most industrialized nations have a native auto sector. Korea followed in Japan’s footsteps. China is following in both. With tariffs on mainland China automotive, their automakers and auto parts manufacturers are heading to Mexico. Their prime market is the U.S.

Since June 2022, 29 Chinese auto parts manufacturers and car makers like native brand Chery and MG Motors (SAIC Motors of Shanghai bought the iconic British car company in 2007) have announced a combined $7.06 billion in investments in Mexico. Of the $14.2 billion in Chinese corporate investment in Mexico in 2022 and 2023, for example, a little less than half came from companies that make cars and car parts, based on a collection of local news articles and data from J.P. Morgan analysts led by Rebecca Wen.

In February 2023, Tesla announced a $5 billion assembly line in Nuevo Leon state, roughly a four hour drive from the Texas border. The factory will have the production capacity to build roughly 1 million Teslas annually, many of them U.S.-bound. Tesla parts suppliers followed them to Mexico in order to continue the relationship.

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