Analysis-BYD and Tesla set to lose most from Mexico’s proposed tariffs on China

By Emily Green

(Reuters) -Electric car rivals BYD and Tesla are set to be the biggest losers from Mexico’s proposed 50 percent tariff on autos imported from China, triggering a likely blow to the fast-growing electric car market in Mexico while sparing the traditional “Big Three” U.S. car manufacturers.

The proposed tariff, announced on Wednesday, targets electric and gasoline cars imported from all countries that Mexico doesn’t have a free trade agreement with, including South Korea, India, Indonesia and Russia. In practice, however, the tariff would mostly impact electric cars manufactured in China and sold in Mexico, industry analysts said.

The levy has the potential to reshape North America’s fastest-growing car market and put the brakes on BYD’s meteoric rise in Mexico, analysts said.

Over the last year, Mexico has raised tariffs on Chinese-manufactured electric vehicles from 0 percent to 15 percent and now 50 percent, said Eugenio Grandio, president of the Electric Mobility Association in Mexico.

“It’s definitely a game-changer,” Grandio said. “Fifty percent [tariff] is a very aggressive number.”

The plan still needs to be approved by Mexico’s Congress, where President Claudia Sheinbaum’s Morena party has a significant majority.

While the proposed tariff appears to be sweeping in nature, it would actually spare legacy U.S. automakers – General Motors, Ford and Stellantis – under a 2003 decree.

That regulation allows car companies with production plants in Mexico to import a percentage of vehicles tariff-free from countries like China that don’t have a free trade agreement with Mexico. Unlike Tesla and BYD, all three legacy U.S. carmakers have production plants in Mexico.

Meanwhile, plans by both Tesla and BYD to set up operations in Mexico have stalled. Tesla suspended construction of its factory in northern Mexico last year, blaming interest rate pressure and a slowing global economy. The proposed factory was projected to be the largest Tesla factory in the world, creating up to 6,000 local jobs.

All of Tesla’s Model 3 and Model Y cars that were sold in Mexico since mid-2023 were manufactured in the company’s Shanghai factory, said Salvador Rosas, vice president of the Tesla Owners Club in Mexico, a Tesla-affiliated enthusiast’s group that collects vehicle identification numbers from members.

Grandio said Tesla likely has a stockpile of cars already in Mexico, which would give it some cushion to try to pivot and import cars from different factories in other parts of the world.

Tesla didn’t respond to a request for comment about the proposed tariff.