The Impact of Trump’s Economic Policies on China’s Electric Vehicle Market

China has delayed approval for BYD, the largest Chinese electric vehicle manufacturer, to build a factory in Mexico. This delay stems from concerns about the potential leakage of technology related to the company’s advanced smart cars to the US. BYD announced plans in 2023 to build a factory in Mexico, with intentions to also produce vehicles in Brazil, Hungary, and Indonesia. The Mexican factory was expected to create 10,000 jobs and produce 150,000 vehicles annually.

Local auto manufacturers require approval from the Chinese Ministry of Commerce for overseas production. However, the ministry has not yet granted this approval. Officials fear that Mexico might grant unfettered access to BYD’s advanced technology and expertise, potentially allowing the US to access it. As a result, Beijing might prioritize projects in countries that are part of its Belt and Road Initiative infrastructure development program. Changing geopolitical dynamics have also contributed to the cooling of relations with Mexico. Mexico attempted to maintain ties with Donald Trump, who threatened to impose tariffs on cross-border trade, potentially impacting exports and jobs.

Trump also initiated a trade war with China by imposing tariffs on Chinese imports. In response, Beijing imposed tariffs on US goods worth approximately $22 billion, primarily targeting the American agricultural sector. The Trump administration accused Mexico of being a “backdoor” for Chinese goods to enter the US duty-free through the North American Free Trade Agreement (NAFTA). The Mexican government denies this but has responded to US pressure by imposing tariffs on Chinese textile products and initiating anti-dumping investigations into steel and aluminum imports from China.

In November, shortly after Trump’s re-election, Mexican President Claudia Sheinbaum stated that there was no “specific” investment proposal from any Chinese company to build a factory in Mexico, despite BYD confirming its intention to invest $1 billion earlier that month. The new Mexican government has complicated the situation for BYD by adopting a hostile stance toward Chinese companies.

While the Mexican government is clearly seeking some investment from China, its trade relationship with the US is far more significant. It would not be “commercially sensible” for BYD to rush into building a production facility in Mexico at this time. The absence of a strong automotive supply chain would force the company to import many components from China, which would be subject to higher tariffs.

BYD reported sales of over 40,000 vehicles in Mexico last year and announced plans to double its sales volume by 2025, opening 30 new dealerships in the country. BYD plans to sell 4.3 million electric and hybrid cars worldwide and unveiled its advanced “God’s Eye” driving system in November, intending to install it in all its models.

Earlier this month, BYD, Tesla’s biggest competitor, raised $5.6 billion from a share sale in Hong Kong, representing a gain of roughly 85% over the past 12 months. This followed founder Wang Chuanfu’s claim that their electric vehicles can now charge as quickly as filling a car with traditional fuel. The proceeds are expected to support its overseas expansion. The billionaire founder said the new charging system developed by BYD’s Shenzhen-based electric vehicle battery group can add around 470 kilometers of range in five minutes.

This claim suggests that BYD has surpassed competitors like Tesla and Mercedes-Benz in fast charging technology. However, the new system relies on several prerequisites, including sufficient voltage at charging stations. Competition is intensifying among electric vehicle and battery manufacturers to establish a faster charging infrastructure to help alleviate consumer concerns about driving range and charging speed compared to traditional internal combustion engine vehicles.

China is expected to install approximately 460,000 new charging stations for electric vehicles this year, representing about two-thirds of the global total. The cumulative total is expected to reach 2.1 million units. The recent surge in BYD’s share price follows the company shaking up the global automotive industry by launching its advanced free “God’s Eye” autonomous driving system.

The group’s revenue reached 777 billion yuan (107 billion), exceeding the 100 billion threshold for the first time. Export growth contributed to the rise in sales figures. Net income increased by 34% to 40 billion yuan (5.5 billion). With overseas sales exceeding 400,000 vehicles last year, the Chinese company recently raised nearly 6 billion to finance its expansion plans, focusing on achieving further growth abroad.

These moves put further pressure on Elon Musk’s Tesla, Germany’s Volkswagen, and a host of local competitors who have lost market share as electric vehicle sales in China have surged in recent years. BYD already controls about 35% of China’s electric vehicle market. Its share is 18% in the battery-only electric vehicle segment and 56% in the plug-in hybrid vehicle segment.