Chinese EV giant BYD has quietly brought a shelved idea back to life. At Expo Transporte 2025 in Guadalajara, corporate vice president Julián Villarroel said the company still plans to open a factory in Mexico and expects an official announcement before January 2026. He described Mexico and Brazil as the company’s “core” markets in Latin America, underlining that BYD is not treating the country as a passing experiment.
That marks a sharp turn from July, when BYD publicly paused its Mexico factory ambitions. At the time, executives cited geopolitical tensions and uncertainty over U.S. trade policy, even though the firm had already floated a plan for a plant capable of producing 150,000 vehicles a year and creating around 10,000 jobs in Mexico.
The shift reflects how quickly the ground has moved under the EV industry. In 2024, the United States raised its Section 301 tariff on Chinese-made electric vehicles from 25 percent to a 100 percent tariff on Chinese EVs, making direct exports to the U.S. almost impossible to price competitively. At the same time, Mexico’s government has followed Washington and Ottawa toward a tougher stance on Chinese goods, especially in autos and steel.
For BYD, that combination of pressure and opportunity makes Mexico both risky and tempting. The company has already built a strong commercial foothold, selling buses, trucks, and passenger vehicles in the country, and now expects to sell thousands of electric trucks a year into the local market. Yet the company also knows that keeping prices attractive will be harder if finished vehicles must cross borders under steep new tariffs.
Villarroel’s comments suggest BYD now believes local production can square the circle. Executives say they want to integrate BYD’s battery production with vehicle assembly in Mexico, using the firm’s control over lithium battery technology to keep costs down and offer more aggressive pricing. In practice, a BYD Mexico plant would not just be another assembly line. It would be a regional anchor for the company’s EV and plug-in hybrid push in Latin America.
The revived plan also comes after a year of mixed messages. Earlier, President Claudia Sheinbaum noted that BYD’s investment proposal had never become a formal, binding commitment, even as Chinese media and Mexican officials floated potential locations. Now, Villarroel’s timeline for a pre-2026 announcement raises expectations that those talks are finally moving beyond the rumor stage.
Still, the way BYD and Mexican authorities present the project matters as much as the numbers. BYD’s Mexico CEO, Ray Zou, has repeatedly stressed that any plant would be aimed primarily at serving Mexican buyers, not as a back door into the U.S. market. He has argued that U.S. elections and tariff cycles “do not affect” the strategic case for building in Mexico because the factory would focus on local production rather than re-exports. That message is aimed at calming U.S. concerns and reassuring Mexican officials who are nervous about becoming a tariff-dodging platform for Chinese brands.
Behind the scenes, though, trade math is never far away. A plant in Mexico cannot magically erase Washington’s 100 percent EV tariff. It can, however, help BYD and other makers design vehicles that meet content and sourcing rules under the Mexico-U.S.-Canada Agreement, or USMCA, and qualify for lower duties when possible.
Tariff politics and USMCA pressure
Mexico’s own policy choices are now central to whether BYD actually breaks ground. In September, the government proposed raising tariffs on autos imported from countries without a free trade deal, including China, to as high as 50 percent, after earlier steps that moved EV tariffs from zero to 15 percent. Analysts say BYD and Tesla would be among the hardest hit if the measure passes, since both currently rely heavily on Chinese-made vehicles for their Mexican sales.
That proposal may sound hostile to Chinese brands, yet BYD’s leadership has treated it as a challenge to manage, not a deal-breaker. Villarroel has said the company is lobbying the federal government to exclude electric vehicles from the final tariff package, arguing that taxing EVs undercuts Mexico’s environmental goals and slows the shift away from combustion engines. The negotiations remain opaque, but they highlight Mexico’s newfound leverage as the region’s main automotive export platform.
At the same time, USMCA rules are tightening in ways that directly shape the business case for building in Mexico rather than shipping complete cars from China. Under the updated agreement, passenger vehicles must meet a 75 percent regional value content threshold to qualify for duty-free treatment, up from 62.5 percent under NAFTA. Automakers also face North American steel and aluminum sourcing requirements and a labor-value rule that pushes more high-wage production into the region.
A factory in Mexico gives BYD at least a theoretical path to meeting those thresholds. The company already manufactures its own batteries, one of the most expensive parts of an EV. If it can pair that with enough North American content in motors, electronics, and bodywork, BYD could assemble models that count as “originating” under USMCA and avoid some of the steepest U.S. tariffs when shipped north.
Whether that is the real endgame is a sensitive question. Mexican officials have repeatedly said that any Chinese investment must comply with USMCA rules and avoid turning the country into a mere transshipment point. Publicly, BYD echoes that line, emphasizing Mexican jobs, local charging infrastructure, and affordable EVs for domestic buyers. But no automaker spends hundreds of millions of dollars on a plant without also thinking about export options, especially when the U.S. remains the world’s most profitable car market.
For Mexico, the stakes cut both ways. A confirmed BYD Mexico plant would reinforce the country’s status as the heart of North American auto manufacturing at a time when nearshoring is already pulling investment from Asia into states like Nuevo León, Guanajuato, and Aguascalientes. It would also deepen Mexico’s role in the global EV supply chain, from battery materials to finished vehicles.
Yet the same project could inflame tensions with Washington if U.S. officials decide Chinese-backed production in Mexico amounts to tariff circumvention. With a major USMCA review coming in 2026, trade lawyers and lobbyists on all sides are already gaming out scenarios in which rules of origin become even stricter and enforcement more aggressive.
For now, BYD is signaling that it is “here to stay” in Mexico and Latin America, even as its global profits wobble and competition inside China intensifies. Mexico, meanwhile, is testing how far it can go in aligning with U.S. tariff policy without slamming the door on Chinese capital and technology. The coming months will show whether those two strategies meet in the middle, in the form of real shovels in Mexican soil — or whether the BYD Mexico plant remains a promise that keeps getting pushed to the next trade cycle.
