Tesla’s Elon Musk wants to mess with Chinese companies in Mexico?
Musk is encouraging Tesla's Chinese suppliers to move to Mexico to recreate the Shanghai supply chain and ensure access to US subsidies. But the White House is preparing to react: here's how
Just as the European Union fears that Chinese companies could circumvent possible restrictions on imports of electric vehicles by opening factories in Hungary , so the United States fears that China could do something similar in Mexico.
TESLA WANTS TO REPLICATE CHINA IN MEXICO
Tesla, the most important electric car company in the world, intends to build a large factory in the Mexican state of Nuevo León, bordering Texas to the north, benefiting from a public incentive of 153 million dollars. According to Bloomberg sources, Elon Musk – who is Tesla's CEO – would have asked Chinese suppliers to establish themselves in Mexico in order to replicate the Shanghai supply chain, already home to a "gigafactory". But Tesla's factory in Austin, Texas, also uses automotive components made in Mexico by Chinese companies.
EXPORTS OF MEXICAN (OR CHINESE?) AUTO COMPONENTS TO THE USA ARE GROWING
According to data from INA, a Mexican industrial association, in 2023 the value of auto parts produced in Mexico and exported to the United States grew by 15 percent on an annual basis, reaching a value of 1.1 billion dollars. Last year there were thirty-three Chinese auto component manufacturing companies in the country; eighteen of these exported their products to the United States.
CHINA'S MANEUVER
Among the Chinese companies in the sector that have recently opened an office in Mexico are Ningbo Tuopu Group, Shanghai Bayon Precision Automobile Component, Suzhou Dongshan Precision Manufacturing, Zhejiang Yinlun Machinery and Chinaust Group. They specialize in the production of heating and cooling systems, shock absorption products, metal components and more.
Chinese companies began settling in large numbers in Mexico in 2018 to avoid the “trade war” against China started by then-President Donald Trump. Chinese companies were reported to be using 9.3 million square meters of space in Mexican industrial parks in 2023, up from 1.2 million square meters in 2019.
The increase in Chinese manufacturing presence in Mexico is linked to the overtaking – for the first time in twenty years – of US imports from Mexico over those from China.
TAKE ADVANTAGE OF THE INFLACTION REDUCTION ACT
Chinese auto component companies active in Mexico can benefit from North American free trade and thus access the tax credit on electric vehicles (with a maximum value of 7,500 dollars) that the United States government established with the Inflation Reduction Act, the great law to stimulate the local and regional production of all technologies for the energy transition: a law designed to encourage the achievement of emissions objectives, but also to allow America to overtake China in the green industrial revolution. In fact, the Inflation Reduction Act provides for limitations on products that contain materials from "foreign entities of concern", i.e. from the People's Republic of China.
THE REACTION OF THE UNITED STATES
The Chinese maneuvers, of course, have alarmed representatives of Canadian manufacturing companies and US unions, but also officials of Joe Biden's administration. Trade Representative Katherine Tai said that the White House has a "clear vision" of China's plans and is studying how to make the trade tariffs introduced by Trump "more strategic", that is, more targeted and effective. Last December, Treasury Secretary Janet Yellen visited Mexico to reach an agreement on strengthening controls on foreign investments.
“The only way Chinese companies can avoid anti- dumping measures and actually be able to export electric vehicles to the United States is to establish full production capacity in Mexico,” Oscar Silva Eguibar, a consultant, told Bloomberg by Roland Berger.
Big names in the Chinese auto industry such as BYD and SAIC Motor are already moving to open factories in Mexico, which could be operational and ready for export within six years. CATL , the largest battery manufacturing company, is also considering building a factory in Mexico; BYD – which makes not only vehicles, but also batteries – has shown interest in investing in lithium extraction.
According to Bloomberg previews, the Biden administration is considering limiting all imports of Chinese electric and "smart" cars, regardless of the country of assembly: Washington fears that the large quantities of data collected by these cars could put the national security, should they fall into the hands of the Chinese Communist Party.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/smartcity/tesla-auto-elettriche-messico-cina/ on Thu, 15 Feb 2024 06:43:43 +0000.