Mexico strikes deal with China to produce SUVs in Mexico

February 2, 2017
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Mexico announced a 4.4 billion peso ($212 million) deal to assemble Chinese cars in the central state of Hidalgo on Wednesday, amid calls for the country to diversify economic ties as tensions have risen with the U.S., its largest trade partner.

Hidalgo Gov. Omar Fayad announced the deal between Mexico’s Giant Motors Latinoamerica and Chinese state-owned automaker JAC Motors at a news conference in the capital.

The plant in Ciudad Sahagun, about 40 miles (60 kilometers) northeast of metropolitan Mexico City, will produce two SUV models and the first cars are expected to roll off assembly lines in the second half of this year.

Fayad said the plant will begin with a capacity of 11,000 vehicles annually, with output ultimately rising to 40,000. The initial phase of the project is expected to create 1,000 direct and 4,500 indirect jobs.

The vehicles are initially aimed at the Mexican market, but there are hopes of distributing elsewhere in Latin America in the future.

“This automobile will proudly carry a label that will say ‘Made in Mexico,'” Fayad said, “and that should be a cause for great pride for the people of Hidalgo.”

The United States now buys about 80 percent of Mexico’s exports, but recent weeks have seen tensions between the two nations amid President Donald Trump’s promises to build a wall along their border and force a renegotiation of the North American Free Trade Agreement. The U.S. administration also floated the possibility of a 20 percent tax on Mexican imports to force Mexico to pay for the wall, though officials later walked that back as simply one of multiple options.

Fayad called the deal announced Wednesday a step down “a road toward the diversification of exports alternative to the United States.”

He said Mexico would do well to try to boost trade with Latin America, Asia, Europe and the Middle East, while also keeping its arms open to its northern neighbor.

“We are expressly working to present a series of options that do not limit us to one single path. … We see (this moment) as a new niche of opportunity,” Fayad said.

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