China has postponed granting approval for BYD’s (HKG: 1211, OTCMKTS: BYDDY) planned electric vehicle (EV) plant in Mexico, citing concerns over potential technology leaks to the United States. According to a Financial Times report published today, the delay stems from fears that Mexico could gain unrestricted access to advanced smart car technology developed by BYD, a Chinese electric carmaker.
Approval Pending for Overseas Expansion
Chinese domestic automakers like BYD require approval from the Ministry of Commerce before they can build manufacturing plants outside of China. Sources close to the situation, who requested anonymity, told the Financial Times that the Ministry has yet to grant this approval.
One of the sources explained that Chinese authorities are particularly concerned about Mexico’s proximity to the United States. The worry is that the advanced technology used in BYD’s smart vehicles might inadvertently end up in the U.S., given the cross-border access.
National Security Concerns
The Chinese government’s decision-making process also factors in national security concerns. According to the Financial Times, BYD’s potential move to Mexico is being scrutinized due to Mexico’s strategic location. The Ministry of Commerce is cautious about the possibility of critical technology leaks and potential collaborations with American companies or interests.
“The commerce ministry’s biggest concern is Mexico’s proximity to the US,” said one individual familiar with the situation. The person added that China is more inclined to approve projects in countries that are part of its Belt and Road Initiative (BRI), a global infrastructure development program that strengthens ties between China and countries in Asia, Africa, and Europe.
Mexico’s Hostile Stance Toward Chinese Firms
Further complicating the approval process, Mexico’s current administration has taken a tougher stance toward Chinese businesses, according to the same report. This growing hostility could make it more difficult for BYD to secure the necessary permissions to build the plant.
A second anonymous source added that Mexico’s position on Chinese companies has created additional hurdles for BYD. As a result, the automaker now faces a delicate balancing act as it navigates the complexities of international politics and technological safeguards.
BYD’s Mexican Plant Plans and Expected Costs
The delay comes at a time when BYD has been actively considering expanding its presence in Mexico. In February 2024, Zou Zhou, manager of BYD Mexico, confirmed that the company was seriously contemplating the establishment of an electric vehicle plant in the country. The factory would serve as a key part of BYD’s expansion strategy in Latin America, following a successful track record in the region.
Earlier reports from Bloomberg indicated that BYD had sent a delegation to the Mexican state of Jalisco to explore potential sites for the plant. Construction costs for the Mexican plant are expected to reach around $600 million, a similar amount to what the company paid for its Brazilian EV facility.
Production Timeline and Sales Goals
BYD’s plans for the Mexican plant include producing 150,000 vehicles during its first phase of operations, with another 150,000 vehicles planned for the second phase. The company had originally intended to announce the location of the plant by the end of 2024, according to statements from Jorge Vallejo, a BYD Mexico executive, in a Reuters report from October 2024.
The company has also set ambitious sales targets for its Mexican operations. BYD sold over 40,000 vehicles in Mexico last year and plans to double that figure by 2025. The automaker also aims to open 30 new dealerships in the country in the coming year.
Strategic Importance for BYD
For BYD, Mexico represents an important part of its broader strategy to expand its global footprint. The Mexican market is particularly attractive due to its growing demand for electric vehicles, bolstered by government incentives for green energy solutions. The automaker’s decision to focus on Mexico also reflects a broader trend of Chinese companies seeking to tap into Latin America’s expanding EV market.
The delay in securing approval for the Mexican plant highlights the complex intersection of international politics, technology, and business strategy. As BYD navigates the regulatory hurdles, it is clear that its plans in Mexico will have broader implications for the company’s global expansion. While the company’s immediate future in Mexico remains uncertain, it continues to prioritize growth in the region and hopes to finalize its plans as soon as possible.
