The Soaring Chinese Car Industry in Mexico

The Chinese automotive market's growth and expansion show no signs of abating. Since China opened its borders to export beyond its domestic market, its rise has been meteoric. In 2022, China eclipsed Germany as the world's second-largest exporter. By the first half of 2023, it surpassed Japan, claiming the top spot, as per data from Moody's Analytics Report. This export surge is propelled by extensive manufacturing capacity and continual enhancements in technology, engineering, and design. The era when Chinese cars were synonymous with lower quality and performance is unequivocally behind us.

In Mexico, Chinese car sales skyrocketed from 6.5% in 2022 to an impressive 9.4% of total sales in 2023, accounting for 129,329 units out of 1,361,433, according to INEGI data. Contrast this with four years ago, where only four Chinese brands represented a mere 2.6% of the Mexican market. Today, 11 brands are operational, with four more on the brink, according to JD Power. JATO Dynamics' figures in developing economies tell a compelling story. Chinese car brands' market share surged from 4.79% in 2021 to 6.46% in 2022. In stark contrast, European brands lost 2.7 points, while Korean brands dipped by 1 point. Price emerges as a significant factor, with Chinese vehicles being, on average, 36% to 50% more affordable.

After a year and a half of operating with the BitCar platform, we've observed that Mexicans view leasing as a viable financing option to experiment with new models, especially those from emerging Chinese brands or hybrid and electric vehicles. Leasing not only facilitates trying out a variety of cars but also provides access to a more extensive range that might be challenging to acquire through traditional loans.

For us, Chinese brands represented 16% of placement in 2023, and we expect this percentage to continue increasing in line with what is happening in the sector.

The Phenomenon of Nearshoring and Electromobility
China's automotive market is over 22 times larger than Mexico's. While Mexico averages approximately 1.1 million car sales annually, China reached a staggering 25.6 million in 2017. The manufacturing progress and China's commitment to electromobility position it not just to capitalize on the local market but also to export competitively priced vehicles to North America. Unlike many Asian and European producers, Chinese brands have embraced hybrid and electric vehicle production, gaining a significant advantage. European producers, constrained by factors like cost and technology, have been slower to transition.

Various nations have been compelled to accelerate the adoption of hybrid and 100% electric options due to political imperatives. This is particularly evident in European countries following the European Union's directive to ban the sale of combustion cars from 2035.

More Than 10 Brands
Several Chinese giants are making a mark in Mexico. MG Motor, supported by the SAIC Motor group, holds fifth place in car sales in China and has a manufacturing and design standout. JAC operates a production plant in Ciudad Sahagun (Hidalgo) with support from Grupo Slim.

BYD (Build your dreams), which launched its Dolphin model in September 2023, competes with models like the Nissan Leaf and SEVE-Tus. BYD aims to close 2023 with 5,000 car sales in Mexico, emphasizing technology to establish itself as a leader in democratizing electric mobility.

Other notable brands include the JMC Vigus pickup, BAIC, Chirey, and Omoda, all part of Chery Holding, with alliances with Jaguar, Land Rover, and Fiat. Changan, having recently separated from Motor Nation, is set to open 100 dealers in 58 cities in 2024.

Upcoming arrivals include brands like Haval, Ora, Bestune, SEV, Jinpeng, Gac Motor, King Long, Skywell, ARRA (Advanced, Responsible, and Renewable Automobiles), Geely Auto, Tank, Poer, Wey, Jaecoo, and Exeed.

Election Year
Along with the potential growth and expansion forecasts of Chinese brands, this year the electoral result in both Mexico and the United States could have an impact on the sector. Given the wave of Chinese brands, voices are being raised in the United States in favor of increasing tariffs on vehicles made in China. American automakers have also expressed concern about Chinese manufacturers.

This fear has also emerged in Europe. The European Commission launched an investigation into the advisability of imposing punitive tariffs to protect European Union producers against Chinese imports of cheaper electric vehicles.

In conclusion, the trajectory of the Chinese automotive industry in Mexico is not just a chapter; it's a transformative saga. The relentless pursuit of quality, affordability, and innovation positions Chinese brands as major players in Mexico's automotive landscape, with far-reaching implications for the broader North American market. As these brands continue to reshape the industry, the future promises an exciting journey filled with innovation, competition, and a dynamic shift in consumer preference.