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Chinese assembler BAIC Group will invest US $2 billion in its first manufacturing plant in Mexico

Chinese assembler BAIC Group will invest US $2 billion in its first manufacturing plant in Mexico

The Beijing Automotive Industry Company (BAIC) plans to open a manufacturing plant in Mexico in the near future to avoid paying the 21% tariff that is currently levied on product that is imported.

The directors of the Chinese company BAIC are preparing to make a public announcement regarding a future investment of at least US $2 billion in the construction of its first manufacturing plant in Mexico.

At present, the company pays 21%  in tariffs on the value of the content of containers that it uses to ship pre-assembled modules.  These modules are shipped to a facility in Veracruz at which final assembly of the vehicles is done.  By setting up a full manufacturing plant in Mexico, the company will be able to sell its products to the Mexican and South American markets at a more competitive cost.

The eight possible locations for the BAIC manufacturing plant in Mexico are Sonora, Coahuila, Nuevo Leon, Puebla, Hidalgo, Guanajuato, Yucatan and Quintana Roo.  Which entity succeeds in attracting the investment will have to do with several factors.  Among them are logistics convenience, local access to suppliers and incentives offered by the state governments under consideration.

With the construction of the new facility, the Beijing Automotive Industry Company will integrate all of the production processes of a car.  This includes stamping, welding, painting, and assembling.  BAIC began marketing its vehicles in Mexico in mid-2016 and has sold over 17,000 units thus far. Currently, BAIC International, which is a BAIC Group subsidiary is asking that the federal government exempt the company from tariffs for the period during which it is constructing its manufacturing plant in Mexico.

According to spokesmen for the company, the leadership of the Beijing Automotive Industry Company is currently putting the finishing touches on plans for its new Mexican operations.  Details about the plant and its production should be available by the end of May.

BAIC Group is a Chinese state-owned enterprise and holding company of several automotive and machine manufacturers located in the Chinese capital, Beijing.  Subsidiaries of the BAIC Group include BAIC Motor; a military vehicle and SUV manufacturer, BAW; and a truck, bus and agricultural equipment maker, Foton Motor.  In addition to this BAIC also manufactures Mercedes and Hyundai branded vehicles for sale in the Chinese market through Beijing Benz and Beijing Hyundai.  BAIC is the fourth or fifth largest domestic automotive manufacturer in China.

The construction of the new manufacturing plant in Mexico will serve to strengthen Mexico’s global position as a leading manufacturer of passenger vehicles.   Mexico is the world’s 8th largest automobile manufacturer and is fourth globally in terms of its exports.  Only Japan, Germany and South Korea ship more cars out of their countries.  When it opens its first manufacturing plant in Mexico, BAIC will be joining other manufacturers such as Ford, GM, Fiat Chrysler, Toyota, Mazda, Honda, Nissan, Hyundai, Audi, Volkswagen others in having a location in the world’s fastest-growing automotive manufacturing market.

With the growth in the presence of major automotive assemblers in the country, opportunities for suppliers to locate a manufacturing plant in Mexico abound.  These companies are invited to learn how the Tecma Group can help them to start-up and maintain a manufacturing presence in Mexico at reduced cost and risk.

 

 

 

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This quarterly publication will be populated with content that is useful and relevant to readers that are contemplating Mexico investments, have operations already within the Republic, as well as to other individuals that have an interest in Mexico and its manufacturing sector.