Chinese cars gain market share in Mexico

Cars made in China have rapidly gained market share in Mexico this year, with Chinese brands particularly gaining ground because of competitive prices, longer warranties and availability.

"Just two years earlier, vehicles made in China did not even reach 5pc of domestic sales and today they represent more than 25pc of imports and 19.1pc of total sales in Mexico," Guillermo Rosales, president of Mexico's auto retailers association (AMDA) recently said.

From January-July of this year, 142,090 of the total 743,930 light vehicles sold in the Mexican market were made in China, under both Chinese and other brands, according to AMDA.

Nearly half of that total, 69,464 autos, were from Chinese car manufacturers Chirey, JAC, MG and BAIC, among others, while 72,626 were manufactured in China by other foreign carmakers such as General Motors (GM), which produces the Onix, Tornado, Captiva and Aveo brands (see table).

Competitive pricing for Chinese brands particularly has supported the growth of made-in-China cars in the Mexican market, despite imported light vehicles from the Asian country having to pay a 20pc import tariff if the car is not electric, said Alejandra Vargas, an economist at Mexican bank Vepormas. Chinese brands also have kept higher inventories than other manufacturers, even in the wake of the pandemic, she added.

Some Chinese SUVs are 17pc cheaper than those from the US and Japan as well.

Warranted growth

Warranties of up to 10 years for some Chinese brands compared with average three-year guarantees for other brands have also increased demand, according to Victor Mendez, executive president of China Chamber Mexico.

Mexico is considered an important market for China because of its geographic location as it provides access to North and South American markets.

Only two Chinese automakers — JAC and BAIC — have assembly plants in Mexico. But other companies such as MG, Great Wall Motors and Geely have expressed plans to build manufacturing facilities in Mexico.

"We are going to have our first plant in Mexico at the end of this year," BYD Mexico's CFO Tobias Zhao told Argus in June.

It will be an assembly plant for light vehicles in the state of Queretaro or Nuevo Leon, he said.

China-based automaker Chirey also expects to build a complete production factory in Monterrey, Nuevo Leon, which will begin operations in 2026, Chirey's executive vice president Brian Wu said in July.

The next stage of Chinese companies competing for business in Mexico will be the electric vehicle (EVs) market.

"Chinese automakers are entering Mexico with internal combustion vehicles, but they all have a greater variety of EVs in their product portfolio," Mendez said.

Mexico's fossil-fuel focused energy policy has hindered development of charging infrastructure for EVs.

Only 4.5pc of Mexico's car sales from January-May were for hybrids or full EVs, even from 4.5pc in the first five months of 2022, despite imports of EVs into Mexico being duty free.

By Luis Romo