Claudia’s Chinese car conundrum: A perspective from our CEO

Claudia Shienbaum’s occupation arsenic president of Mexico is getting progressively difficult.

I person antecedently written and spoken astir the galore challenges she faces, from a slowing system successful Mexico to an assertive President Trump successful the U.S. She has galore important and analyzable decisions to marque connected trade, infrastructure, wellness care, judicial reform, the cartels, acquisition and different argumentation issues with the U.S.

One of the much analyzable choices she faces is regarding Chinese cars and Chinese concern successful Mexico. Let maine explain.

Since the signing of NAFTA implicit 30 years ago, Mexico has steadily accrued its automotive conveyance accumulation to go 1 of the world’s largest car producers. In 2024, Mexico produced astir 4 cardinal vehicles — a grounds for the state and a 5.5% summation from 2023. Nearly 88% of Mexico’s accumulation is exported, with implicit 80% going to the United States.

The state has developed an arsenic awesome car parts accumulation manufacture of implicit US $120 cardinal with 87% being exported. The effect of this maturation has placed Mexico successful 5th spot globally for conveyance accumulation and 4th spot globally for car parts production.

So acold truthful good, right? But things rapidly go much complicated. To assistance maine recognize what is going connected not lone successful the Mexican car marketplace but besides globally, I sat down with Michael Dunne of Dunne Insights. Dunne has spent implicit 30 years moving successful the planetary car marketplace and is 1 of the champion radical globally to speech to erstwhile looking to recognize trends and aboriginal projections for the industry.

Mexico News Daily CEO Travis Bembenek sat down with Michael Dunne to get his instrumentality connected the challenges facing Mexico’s car industry. (Dunne Insights)

Here are immoderate cardinal takeaways from our conversation.

1. Mexico’s home car manufacture income past twelvemonth were astir 1.5 cardinal vehicles, an summation of astir 10%. Surprisingly, lone 34% of the cars sold successful the state past twelvemonth were produced domestically portion 66% were imported. Think astir that for a moment. Mexico exports 88% of its ain car accumulation and yet imports 66% of its home car sales! About 1 3rd of the imports are from China, meaning Chinese-made vehicles made up astir 20% of the home car marketplace past twelvemonth — up from astir thing conscionable a fewer years ago.

2. Despite Mexico exporting 88% of its ain conveyance production, the state is present the No. 1 importer of Chinese-made cars, conscionable precocious overtaking Russia. It’s a important milestone: Russia is geographically adjacent to China, nary longer has overmuch of its ain car industry, and is geopolitically adjacent to China. Mexico, connected the different hand, is acold from China, has its ain monolithic car industry, is geopolitically adjacent to the U.S. … and yet it is present importing much Chinese cars than immoderate different country?

3. “From China” doesn’t ever mean “Chinese.” Although Mexico is progressively importing a assortment of Chinese brands similar BYD, JAC, GAC, etc., it is successful information General Motors cars made successful China that marque up the largest percent of imports into Mexico. So contempt GM having 4 plants successful the country, the immense bulk of its accumulation is exported. GM has specified important overcapacity successful China that it has looked to different markets to export its Chinese-made vehicles and Mexico has go the preferred export marketplace for its cars.

4. Several Chinese car firms person expressed involvement successful gathering plants successful Mexico, with market-leading BYD teasing the announcement present for implicit a year. No large announcement has yet been confirmed, but the complaint astatine which impressive-looking Chinese car dealerships person been being built crossed the state has shown nary motion of a slowdown. There is adjacent a caller BYD dealership rapidly going up successful San Miguel de Allende, wherever I live. It’s hard to ideate a important announcement of a caller works taking spot successful the existent commercialized clime since the commencement of the 2nd Trump administration.

5. Chinese-made cars person made immense strides successful quality, innovation and terms implicit the past respective years. According to Dunne, the mean caller Chinese car export is priced astatine U.S. $19,000, compared to US $48,000 for a caller U.S. car. China by acold leads the satellite successful electrical car (and battery) production. Ironically, astir 80% of the cars imported into Mexico from China are gasoline-powered (from plants that person overcapacity owed to constricted request successful China for gasoline-powered cars).

Despite China’s dominance successful the electrical conveyance market, little than a 4th of Chinese vehicles imported into Mexico are electric. (File photo)

6. The USMCA statement that replaced NAFTA is acceptable to beryllium renewed successful 2026. The archetypal program of what was to instrumentality spot successful 2026 was not a “renegotiation,” but alternatively a renewal — but that was earlier Trump starting making threats to interruption the statement adjacent earlier the authoritative renewal process began. Trump has threatened tariffs connected Mexico (in wide usurpation of the agreement), past acted connected this menace and placed tariffs, past removed them, and past threatened tariffs again connected Mexico for non-trade reasons (like the borderline and fentanyl). He has besides pressured car companies astir the globe to summation concern successful the U.S. and told them to not expect to beryllium capable to import autos into the U.S. from immoderate different state (including Mexico) without tariffs. In fact, determination person adjacent been rumors (which the institution aboriginal denied) that Honda was looking to determination accumulation from Mexico to the U.S.

7. No substance what happens with the USMCA renewal, it’s hard to ideate immoderate conveyance companies announcing important caller investments successful Mexico anytime soon. It looks similar astir car manufacture overseas nonstop investment, which historically represents 15% to 20% of the country’s full FDI, is going to beryllium frozen. This means that a important operator of Mexico’s GDP maturation volition apt beryllium stalled for immoderate time.

So wherever does that permission us? The immense bulk of Mexican car accumulation is exported to the United States, and Trump has been continually threatening to enactment tariffs connected those products sooner oregon later. A bulk of home car income successful Mexico is imported, with Chinese-made cars making up astir a 3rd of those imports and General Motors being the largest importer.

President Sheinbaum has respective options. She could halt immoderate caller Chinese car FDI into Mexico, which would beryllium a important bargaining spot to the U.S. and Canada for the USMCA renewal. Given what we person seen frankincense far, that volition not beryllium enough.

Mexico’s commercialized narration with China could beryllium connected the bargaining array arsenic the Sheinbaum medication negotiates with the U.S. connected tariffs. (Graciela López/Cuartoscuro)

So should she halt immoderate and each Chinese-made imports from coming into the country, adjacent if they are GM cars? That would beryllium viewed precise positively successful the USMCA discussions, but it would besides contradict Mexican consumers entree to low-cost, high-quality and progressively electrical Chinese-made cars. Given Trump’s tendency to enactment tariffs connected each cars not made successful the USA (including those made successful Mexico), possibly her medication tin debar tariffs connected Mexican-made cars by stopping each Chinese imports — but is that truly a champion lawsuit script for Mexico? Talk astir a conundrum.

Dunne thinks Mexico could connection a quota to bounds the percent of home car income allowed to travel from China tariff-free to appease USMCA negotiators. Anything supra that quota could beryllium taxable to higher levels of tariffs. This attack mightiness let Mexican negotiators to locomotion the tightrope of avoiding tariffs from the U.S. portion inactive allowing a constricted fig of Chinese cars into the country.

These types of argumentation changes mightiness assistance Mexico support what it has successful presumption of existent production, but intelligibly does not bode good for aboriginal maturation and FDI successful Mexico’s car industry. Adding successful the menace of robotics and rapidly advancing artificial quality connected the mill floor, it’s imaginable the car manufacture volition nary longer beryllium a occupation creator successful the aboriginal and really mightiness request little labor. Dunne says helium has ne'er seen thing similar what is happening successful the car manufacture today; the concern is much dynamic, fast-paced, uncertain and unpredictable than astatine immoderate different clip successful his career.

Perhaps President Sheinbaum’s program to person a locally-produced Mexican electrical car called the “Olinia” isn’t specified a brainsick thought aft all.

What bash you deliberation Claudia should do? Let america cognize successful the comments!

Travis Bembenek is the CEO of Mexico News Daily and has been living, moving oregon playing successful Mexico for astir 30 years.