Beijing is delaying approval for carmaker BYD to build a plant in Mexico amid concerns that the smart car technology developed by China’s biggest electric-vehicle maker could leak across the border to the US.
BYD first announced plans for a car plant in Mexico in 2023, along with intentions to make cars in Brazil, Hungary and Indonesia. It said the Mexican plant would create 10,000 jobs and produce 150,000 vehicles a year.
But domestic automakers require approval from China’s commerce ministry to manufacture overseas and it has yet to give approval, according to two people familiar with the matter.
Authorities fear Mexico would gain unrestricted access to BYD’s advanced technology and knowhow, they said, even possibly allowing US access to it. “The commerce ministry’s biggest concern is Mexico’s proximity to the US,” said one of the people.
Beijing is also giving preference to projects in countries that are part of China’s Belt and Road infrastructure development programme, according to the people.
Shifting geopolitical dynamics have also contributed to Mexico cooling on the plant. Mexico has sought to maintain relations with Donald Trump, who has put tariffs on cross-border trade, threatening exports and jobs.
Trump has also launched a trade war with Beijing, imposing tariffs on imports from China. Beijing retaliated by slapping tariffs on roughly $22bn in US goods, aimed mainly at America’s farming sector.
Trump’s team has accused Mexico of being a “backdoor” for Chinese goods to enter the US duty-free through the North American Free Trade Agreement. The Mexican government denies this but has responded to US pressure by placing tariffs on Chinese textiles and launching anti-dumping investigations into steel and aluminium products originating from China.
“Mexico’s new government has taken a hostile attitude towards Chinese companies, making the situation even more challenging for BYD,” said the second person.
In November, shortly after Trump’s re-election, Mexico’s President Claudia Sheinbaum said there was still no “firm” investment proposal from any Chinese company to set up in Mexico, despite BYD having reaffirmed its intent to invest $1bn earlier that month.
“The Mexican government obviously would like to get some of the investments [from China], but [its] trading relationship with the US is a lot more important,” said Gregor Sebastian, a senior analyst at US-based consultancy Rhodium Group.
It doesn’t “make business sense” for BYD to hasten the construction of a production facility in Mexico at the moment, Sebastian added, pointing out that the lack of a robust automotive supply chain would force BYD to import numerous components from China, subjecting them to higher tariffs.
When asked whether US tariffs and Mexico’s tougher stance on China had stalled the company’s plans, Stella Li, executive vice-president at BYD, said that it had “not decided [on] the Mexico facility yet”.
“Every day is different news, so we just have to do our job,” said Li in a recent interview with the FT. “More study has to be done on how we can satisfy and improve to deliver the best result to everybody.”
In February last year, Li had said they would select a location for the factory by the end of 2024.
BYD reported sales of more than 40,000 vehicles in Mexico last year. It has said it wants to double sales volume and open 30 new dealerships in the country in 2025.
Mexico’s economy ministry said it had no further comment beyond Sheinbaum’s previous remarks. BYD and China’s commerce ministry did not respond to a request for comment.
BYD sold 4.3mn EVs and hybrids globally in 2024 and unveiled its “God’s Eye” advanced driving system in February, with plans to install it on its entire model line-up.
Earlier this month, Tesla’s main rival raised $5.6bn in a Hong Kong share sale, with the proceeds expected to help fuel its overseas expansion.
But it has suffered a setback with its $1bn development in Brazil, which was delayed in December when the authorities halted construction over workers being subject to “slavery”-like conditions. BYD subsequently fired a Chinese subcontractor.
