The Chinese government has put a hold on granting approval for BYD (HKG: 1211, OTCMKTS: BYDDY) to establish a plant in Mexico due to concerns about the potential leakage of smart car technology developed by the company to the US, as reported by the Financial Times today.
According to the report, domestic automakers in China are required to obtain approval from the Ministry of Commerce before venturing into overseas production, a permission that has not yet been granted to BYD. The authorities fear that Mexico could gain unrestricted access to BYD’s advanced technology and know-how, which could ultimately allow the US to benefit from it as well.
One source familiar with the matter mentioned to the Financial Times that the commerce ministry’s main worry stems from Mexico’s proximity to the US. The Chinese government tends to prioritize projects in countries participating in the Belt and Road Initiative, a global infrastructure development program.
The situation is further complicated by the current stance of Mexico’s new government towards Chinese companies, making it even more challenging for BYD to proceed with its plans. In February 2024, Zou Zhou, the manager of BYD Mexico, had hinted at the company’s interest in establishing an electric vehicle (EV) plant in Mexico.
Reports from last March indicated that BYD had sent a delegation to Jalisco, Mexico, to explore the possibility of setting up an EV plant in the region. The projected cost of constructing the Mexican plant was estimated to be around $600 million, similar to the amount spent on BYD’s Brazilian EV plant.
By October 2024, it was reported by Reuters that Jorge Vallejo, an executive at BYD Mexico, anticipated an announcement by the end of the year regarding the location of BYD’s first plant in Mexico. The initial phase of production was expected to yield 150,000 vehicles, with an additional 150,000 vehicles in the subsequent phase.
Despite facing delays in obtaining approval for its Mexican plant, BYD achieved significant sales in Mexico the previous year, exceeding 40,000 units. The company aimed to double its sales in 2025 and expand its presence in the country by opening 30 new dealerships.
In conclusion, the road towards establishing a manufacturing plant in Mexico has been met with obstacles for BYD, as the Chinese government’s concerns about technology leakage to the US have led to delays in obtaining approval. The company remains optimistic about its growth prospects in Mexico, despite the current challenges it faces.
