Mexico, a Leap Board for China's new energy vehicle industry to enter the United States?
(By Robert, cnboxingring.com)-Neighboring the United States to the north and Latin America to the south, Mexico is becoming an important leap board for China's new energy vehicle industry to expand overseas.
From recent years, it can be seen that China's new energy vehicle industry has begun to emerge in this traditional automotive industry integration area. In addition to the astonishing growth rate of vehicle sales, Chinese new energy vehicle companies and supply chain manufacturers have also concentrated on building factories in Mexico to lay out the local new energy industry chain, because their gaze has never been solely on Mexico itself.
An emerging producer and seller of new energy vehicles
For Chinese new energy vehicle companies, Mexico is becoming a promising overseas market, which is closely related to the development of the local automotive industry and the state of the automotive market.
Current situation of the Mexican automotive market
The automotive industry is Mexico's largest manufacturing sector and a pillar industry - according to the Mexican Association of Automobile Manufacturers (AMIA), the automotive industry accounts for 3.8% of Mexico's gross domestic product (GDP) and 20.5% of its manufacturing output.
But unlike other major automobile manufacturing countries, Mexico's automobile manufacturing industry is highly fragmented from its domestic automobile market.
As the sixth largest automobile production base in the world, Mexico's total automobile production in 2022 was 3.308 million units, an increase of 9.2% compared to 3.028 million units in 2021. Even under the influence of the global pandemic, Mexico's annual automobile production reached 3.04 million vehicles in 2020, which is far from the historical high of 4.665 million vehicles in 2014. However, the annual production can still maintain a stable level of around 3 million vehicles.
Meanwhile, Mexico is also the fourth largest exporter of light vehicles in the world, and domestically produced cars in Mexico are mainly used for export. In 2022, out of Mexico's 3.308 million car production, 2.866 million vehicles were exported, accounting for 86.6% of the total, mainly to North America, South America, and Europe. Nearly 80% of the exported vehicles are shipped to the US market each year. In 2022 alone, Mexico exported 2.222 million vehicles to the United States, accounting for 77.5% of the total.
In terms of sales, the annual sales of new cars in the Mexican automotive market are approximately one million units. According to statistics from the Mexican Automobile Industry Association (AMIA), a total of 1.095 million cars were sold in the Mexican automobile market in 2022, an increase of 7.8% year-on-year from 1.015 million cars in 2021. Even under the influence of COVID-19, the Mexican auto market hit a low point in 2020, but 950,000 new cars were sold.
At this volume, the sales of new energy vehicles account for a very small proportion.
For example, among the average annual sales of millions of new cars, the total sales of new energy vehicles in Mexico in 2022 were 51065, accounting for 4.7% of the new car sales of 1.095 million. This still includes the overall data of pure electric, hybrid, and plug-in hybrid new energy vehicles. If we look at it in detail, the annual sales of pure electric vehicles are 5631 units, accounting for only 11% of the sales of new energy vehicles and 0.5% of the overall sales of new cars in China.
Compared to pure electric vehicles, hybrid cars are more popular in the Mexican market. According to data from the Mexican Association of Automobile Manufacturers (AMIA), in 2020, only 1.8% of electric vehicle registrations in Mexico were pure electric vehicles, which increased to 2.4% in 2021. By 2022, the proportion of pure electric vehicle registrations had jumped to 8.8%, while hybrid vehicles still accounted for the majority.
Of course, the overall sales of new energy vehicles are also increasing year by year, from 24405 in 2020 to 47079 in 2021, reaching 51065 in 2022. Under this trend, the Mexican National Institute of Statistics and Geography (INEGI) predicts that by 2030, the national sales of electric vehicles in Mexico will reach 72655 units.
Interestingly, as an important global automobile production base, Mexico's automobile production mainly serves non local markets, and local automobile sales mainly rely on automobile imports.
According to data statistics, Mexico imported a total of 651710 cars from around the world in 2022. Among them, 153707 vehicles come from China, accounting for about 23.6%, which is twice the number of imported Chinese cars compared to the same period in 2021. Now, Mexico has become the largest market for Chinese vehicle exports, with one out of every four imported cars from Mexico being from China. China has also jumped from being the fourth largest supplier of automobiles to Mexico, followed by the United States (92591 vehicles), Brazil (88592 vehicles), and Japan (65714 vehicles).
This year, Chinese cars are also continuing this trend. Guillermo Rossles, the head of the Mexican Automobile Dealers Association (AMDA), has stated that from January to August 2023, cars from China accounted for 19.4% of Mexican car imports, which is more than three times the proportion of 5.7% in the same period in 2018.
For any Chinese car brand, the annual sales of millions of new cars and the emerging new energy market undoubtedly have great potential.
Cheap models are more popular
Mexican car consumption benefits from the economy but is also limited by it.
On the one hand, as an economic powerhouse in Latin America, Mexico's consumer demand for cars is constantly increasing; On the other hand, due to the uneven economic development in Mexico, local consumers are more inclined to choose low-end models with lower prices.
In 2022, Mexico's GDP reached $1.29 trillion, ranking second among Latin American countries. With the development of Mexico's economy, coupled with poor public transportation conditions, people's demand for private cars has also been strong. Last year, the number of cars owned by a thousand people in Mexico has reached 330.
However, Mexico still belongs to a developing country, with problems of uneven resource allocation and large wealth gap. The proportion of low-income groups is also higher, and the polarization of vehicles traveling on Mexico's roads also reflects the local people's consumption capacity issues - or it is a very large typical American pickup sports car, such as the Ford Explorer and Chevrolet Saboban; Or it could be compact cars like Nissan Sylphy and Chevrolet Avio.
Of course, the best-selling models on the Mexican market are mostly low-end small sedans, compact SUVs, small pickup trucks and other A-class cars, also known as "outdated models eliminated from the market 20 or 30 years ago.".
Coincidentally, Mexico lacks influential local car brands, making it a huge dumping ground for major global car manufacturers. Coupled with the foundation laid by multinational car manufacturers in the traditional fuel era, Nissan, General Motors, Volkswagen, Toyota, and Kia dominate the top five car sales rankings in Mexico.
Relatively speaking, although Chinese car companies currently have a much lower market share in Mexico than multinational car manufacturers in Europe, America, Japan, and South Korea, their performance in sales growth is very impressive. According to the Mexican National Bureau of Statistics (INEGI), from January to July 2023, Chinese car brands accounted for 9.3% of sales, an increase of more than ten times compared to 0.6% in 2019.
In 2022, SAIC MG sold 48112 vehicles in Mexico, accounting for 4.4% of the market share, an increase of 194.1% compared to last year's sales of 16358 vehicles. JAC JAC sold 16357 vehicles annually, accounting for 1.5% of the market share, an increase of 99.4% compared to last year's 8203 vehicles.
In terms of price, SAIC MG starts at 298000 pesos (approximately RMB 125000) in the Mexican market, while JAC JAC starts at 299000 pesos (approximately RMB 125000). Basically, the price is at the same level as the mainstream small gasoline vehicles on the market.
Although it is not possible to give some high-end new energy brands an advantage in terms of price, a large base can allow Chinese new energy vehicle companies to introduce more cost-effective and popular models into the market, in order to win the favor of Mexican consumers.
Emerging Chinese car companies
Supported by sales, many Chinese brands have emerged in the Mexican market.
The Mexican National Bureau of Statistics has compiled a list of the six most popular Chinese brands in the local market for 2023.
SAIC MG sold 4925 cars in the Mexican market in March 2023.
Chery CHERY, one of the Chinese car brands that recently entered the Mexican market, sold a total of 3369 cars in Mexico in March 2023.
JAC, which entered Mexico in 2017, is also one of the earliest Chinese automotive brands to enter Mexico. In March 2023, it sold 1713 cars throughout Mexico.
BAIC, Jiangling, and Changan jointly sold 1035 cars under the name Motornation in Mexico in March 2023.
In addition to the traditional vehicle export model, Chinese car companies, including new energy, are also gradually exploring models of building factories in Mexico or deep cooperation with local agents.
As of now, Chinese new energy vehicle companies entering Mexico include but are not limited to:
In 2019, JAC Motor officially launched new energy vehicles in Mexico. JAC Motor has always been one of the main suppliers of electric vehicles in the local market, and has established an assembly plant in the state of Idalgo in Mexico.
In 2022, Chery Automobile entered the Mexican market and sold under the name Chirey locally. It plans to build a factory in Mexico this year with an annual production capacity of 400000 vehicles, which will mainly be used for the production of new energy vehicles. In October 2023, Brian Wu, Executive Vice President of Chery Mexico, announced that Chery plans to return to the US market and revealed that the first batch of cars to enter the US includes pure electric and plug-in hybrid models produced in Mexican factories.
In December 2022, Jetour Motors signed a cooperation agreement with Mexico's LDR Group to officially enter the Mexican market. In March 2023, Jetour announced an investment of $3 billion to establish new factories in the states of Aguascalientes or Guanajuato, Mexico. The factory is expected to open in 2024 and initially produce gasoline powered vehicles, with pure electric vehicles produced within two to three years.
On March 15, 2023, SAIC Group announced the first launch of the self operated Ningde Mexico international route. Load MG MULAN Mulan's new car and head to the port of Lazaro Cardenas, Mexico. In April, SAIC MG announced that it was considering building a new factory in Mexico and planned to enter the US market.
In March 2023, Great Wall Motors established a subsidiary in Mexico and successively launched two new energy vehicles. A relevant person in charge stated that Great Wall has initiated research on investment projects for local factories. On September 7, 2023, Great Wall Motors GWM brand and Haval H6 HEV held a "Hello Tomorrow" themed press conference in Mexico City, officially entering Mexico.
Undoubtedly, Mexico's ability to become an important site for the global new energy vehicle industry layout is closely related to its huge market potential, important strategic position, and support for the new energy vehicle industry.
However, Mexico's electrification journey seems to be longer than other countries or regions. Or rather, it doesn't seem so clear.
In the actual implementation process, even Tesla, a globally unique new energy vehicle company, faces significant challenges. At the financial report meeting, Musk also admitted that building a factory in Mexico may incur higher cost pressures.
The current situation in Mexico is not enough to support the rapid development of new energy. But choosing to go to Mexico to build a factory, Chinese new energy vehicle supply chain companies believe that Tesla's Mexico factory can drive the growth of new energy in Mexico. Chinese new energy vehicle companies are also optimistic that the Mexican market, with millions of new cars added each year. It is a blue ocean.
After all, besides Mexico, what everyone is looking at is the larger American market behind it.
