The work of Claudia Shienbaum as president of Mexico becomes more and more difficult.
I have already written and spoken on the many challenges it faces, From an economy slowed in Mexico to an aggressive president Trump in the United States, she has many important and complex decisions to take on trade, infrastructure, health care, judicial reform, cartels, education and other political questions with the United States
One of the most complicated choices it faces concerns Chinese cars and Chinese investments in Mexico. Let me explain.
Since the signing of Alena more than 30 years ago, Mexico has regularly increased its production of motor vehicles to become one of the largest car producers in the world. In 2024, Mexico produced nearly 4 million vehicles – a record for the country and an increase of 5.5% compared to 2023. Almost 88% of Mexico production is exported, more than 80% in the United States.
The country has developed an equally impressive motor parts production industry over $ 120 billion with 87% export. The result of this growth has placed Mexico in fifth place in the world for vehicle production and fourth place in the world for the production of automotive parts.
So far everything is fine, right? But things quickly become more complicated. To help me understand what is going on not only on the Mexican automotive market but also in the world, I sat with Michael Dunne de Dunne Insights. Dunne has spent more than 30 years working on the world automotive market and is one of the best people worldwide to speak when looking for industry trends and projections.
Here are some key dishes of our conversation.
1. Sales of the interior automotive industry in Mexico last year represented nearly 1.5 million vehicles, an increase of almost 10%. Surprisingly, only 34% of cars sold in the country last year were produced at the national level while 66% were imported. Think about it for a moment. Mexico exports 88% of its own automotive production and however imports 66% of its national car sales! About a third of imports come from China, which means that Chinese manufacturing vehicles represented around 20% of the national automotive market last year – against almost nothing a few years ago.
2. Although Mexico has exported 88% of its own production of vehicles, the country is now the n ° 1 importer of Chinese manufacturing cars, recently exceeding Russia. This is an important step: Russia is geographically close to China, no longer has a large part of its own automotive industry and is geopolitically close to China. Mexico, on the other hand, is far from China, has its own massive automotive industry, is geopolitically close to the United States … And yet it is now more important from Chinese cars than any other country?
3. “De China” does not always mean “Chinese”. Although Mexico is increasingly importing a variety of Chinese brands such as Byd, Jac, GAC, etc., it is in fact General Motors cars made in China which constitute the largest percentage of imports in Mexico. Thus, although GM has four factories in the country, the vast majority of its production is exported. GM has such an important overcapacity in China that it has sought other markets to export its Chinese manufacturing vehicles and Mexico has become the favorite export market for its cars.
4. Several Chinese automotive companies have expressed their interest in the construction of factories in Mexico, With Byd Leader on the market that has been teasing it for over a year. No major announcement has yet been confirmed, but the rate at which the impressive Chinese car dealers have been built across the country have shown no signs of slowdown. There is even a new byd dealer who quickly climbs to San Miguel de Allende, where I live. It is difficult to imagine an important announcement of a new factory which takes place in the current commercial climate since the start of the second Trump administration.
5. Chinese manufacturing cars have made huge progress in quality, innovation and price in recent years. According to Dunne, the new export of average Chinese cars is at the price of US $ 19,000, compared to US $ 48,000 for a new American car. China leads the world by far in the production of electric cars (and battery). Ironically, almost 80% of cars imported into Mexico from China are powered by petrol (factories that have overcapacity due to limited demand in China for petrol cars).
6. The USMCA agreement which replaced Alena should be renewed in 2026. The initial plan of what was happening in 2026 was not a “renegotiation”, but rather a renewal – but it was before Trump begins to threaten the agreement before the start of the official renewal process. Trump threatened with prices on Mexico (in clear violation of the agreement), then acted on this threat and placed prices, then removed them, then threatened prices on Mexico again for non -traditional reasons (such as the border and fentanyl). He has also put pressure on car companies around the world to increase investments in the United States and told them not to expect to be able to import cars in the United States from any other countries (including Mexico) without prices. In fact, there were even rumors (which the company denied later) that Honda sought to move the production of Mexico to the United States
7. No matter what is happening with the renewal of the USMCA, it is difficult to imagine that vehicle companies announce new investments in Mexico as soon as it is. It looks like most foreign direct investments in the automotive industry, which historically represents 15% to 20% of The total IDE of the country, Go be frozen. This means that an important driver of Mexico GDP growth will probably be blocked for a while.
So where does that leave us? The vast majority of Mexican automotive production is exported to the United States, and Trump has continuously threatened to put prices on these products sooner or later. The majority of national automobile sales in Mexico are imported, Chinese manufacturing cars constituting nearly a third of these imports and General Motors being the largest importer.
President Sheinbaum has several options. It could stop any new Chinese FDI in Mexico, which would be a major negotiation program in the United States and Canada for the renewal of the USMCA. Given what we have seen so far, that will not be enough.
So, should it stop all Chinese manufacturing imports when arriving in the country, even if they are GM cars? This would be seen very positively in USMCA discussions, but it would also refuse Mexican consumers access to low -cost, high quality and more and more electric Chinese manufacturing cars. Given Trump’s desire to put prices on all cars not manufactured in the United States (including those manufactured in Mexico), his administration can perhaps avoid prices on Mexican manufacturing cars by stopping all Chinese imports-but is it really a better scenario for Mexico? Talk about an enigma.
Dunne thinks that Mexico could offer a quota to limit the percentage of sales of national cars authorized to come from China without a price to appease USMCA negotiators. Anything above this quota could be subjected to higher levels of prices. This approach could allow Mexican negotiators to browse the tightrope to avoid the United States prices while allowing a limited number of Chinese cars in the country.
These types of policy changes could help Mexico keep what it has in terms of current production, but clearly does not do good for future growth and IED in the Mexico automotive industry. Adding the threat of robotics and quickly advancing artificial intelligence in the factory floor, it is possible that the automotive industry is no longer a job creator in the future and could actually need less labor. Dunne says that he has never seen anything like this in the automotive industry today; The situation is more dynamic, rapid, uncertain and unpredictable than to any other moment in his career.
Maybe President Sheinbaum’s plan to have A Mexican electric car produced locally called “olinia” It is not such a crazy idea after all.
What do you think Claudia should do? Let us know in the comments!
Travis Bembenek is the CEO of Mexico News Daily AND has been living, working or playing Mexico for almost 30 years.
