By Marianne Lavelle and Dan Gearino, Inside Climate News
This article originally appeared on Inside Climate News, a nonprofit, non-partisan news organization that covers climate, energy and the environment. Sign up for their newsletter here.
MEXICO CITY — Paulina Hernández inspected her new BYD King plug-in hybrid sedan when the sales team removed the oversized red bow and cover. She noticed a smudge on the “Time Grey” finish and her sales rep, Veronica Montoya, rushed to her side with a spray bottle and cloth. Montoya held them as she answered her customer’s questions over the next hour, ready to wipe away any mark or doubts that this sale would go through.
Hernández, 33, a classical dance instructor who lives in Mexico City’s tony Santa Fe district, had been looking for a better car for her daily 38-mile commute to the neighboring city of Toluca through the capital’s notoriously bad traffic. The BYD King, with an all-electric range of 31 miles and total range of 730 miles, sells for the equivalent of $24,940 USD.
“The idea is that I’ll pay off this car with what I save from not buying gasoline,” Hernández said.
She was the latest of what the sales team says has been an “explosion” of customers at BYD Santa Fe, the first of 30 showrooms the Chinese electric car juggernaut has opened across Mexico in the past year. The company plans to open 20 more dealerships in the country this year and soon will announce the location for a Mexico factory that will build 150,000 EVs per year.
This kind of rapid growth enabled BYD to overtake American EV pioneer Tesla as the world’s No. 1 electric vehicle company (when counting both its all-electric and its plug-in hybrids) in 2022. It’s now selling twice as many cars as Tesla.
All signs point to an EV future, and BYD’s charge across Mexico is a vivid demonstration of how China has positioned itself to dominate that future. The U.S. presidential election, with two different visions for autos, will help to determine whether the country will try to close the gap with China, or double down on fossil-fuel-powered transportation.
Inside Climate News has spent the year examining the rise of EVs through the lens of U.S. politics. President Joe Biden’s climate law, the Inflation Reduction Act, has set off an EV factory building boom. U.S. automakers are welcoming federal money and want to ramp up their EV lineups to compete globally, which is creating a wedge in the alliance between an auto industry and the oil industry. Auto workers are watching the changes with both trepidation and hope. Car dealers, meanwhile, are trying to figure out how to sell EVs and facing reluctance, especially in rural areas.
The tensions are made even greater by the growing awareness that a geopolitical rival is knocking at the door in the form of Chinese EVs.
Vice President Kamala Harris is likely to continue the Biden administration’s policy of using tax credits to jump-start a U.S.-based supply chain for EVs and emissions policies to nudge automakers away from internal combustion engines, while also using tariffs to keep Chinese imports off of U.S. dealer lots.
Former President Donald Trump, who calls himself “Mr. Tariff,” has proposed astronomical duties to keep Chinese EVs out of the United States. While Trump now says he likes EVs since Tesla CEO Elon Musk became one of his campaign’s megadonors, he sees them as suitable for only a “small slice” of the public. He has pledged to undo the policies that support domestic production of EVs.
Trump wouldn’t be able to stop the global transition to EVs, but he could slow it in the United States, said Ed Kim, president and chief analyst at AutoPacific, a California-based research firm.
“The outcome of the election can have a very significant impact on the potential growth rate of EVs in the U.S. market,” he said.
While Trump repeatedly asserts that his approach would save U.S.-based automakers, the opposite is more likely to be true.
“Killing off the [EV] incentives would certainly serve to shrink the market for EVs here, which would, in turn, put many of the non-Chinese automakers, the Fords and the GMs and so on, in a much less competitive position globally,” Kim said.
Caution: Potential Policy Swerve Ahead
At a recent conference in Columbus, Ohio, battery and automotive companies representatives gathered to talk about a future that could change drastically depending on who wins the election.
The potential for a swerve in U.S. policy ran counter to what the automakers said they wanted, which was predictability.
“From an industry perspective, and we talk about this in our trade association a lot, we just want certainty,” said Michael Maten, director of EV policy and regulatory affairs for General Motors. He was speaking in general, and not about specific candidates.
Rho Motion, a United Kingdom-based research firm that organized the conference has quantified how the election results may affect the EV market.
If Trump wins and Republicans control Congress, the result would be EV battery demand in 2040 that is more than 40 percent lower than the scenarios in which Harris wins, according to Rho Motion’s projection.
The main policy lever that is driving the forecast is the difference in how Trump and Harris would likely handle tailpipe emissions rules, which do not require congressional approval. Harris likely would continue Biden policies that make rapid increases to emissions standards, which automakers are expected to follow by increasing the share of their fleets that use plug-in vehicles. Trump has blasted the pollution policies as an “EV mandate” that he has pledged to end on Day One of his second term. Harris “wants to end all gas-powered cars,” say the ads he is running in Michigan.
Another big contrast is in the implementation of the Inflation Reduction Act. Trump has said he wants to repeal aspects of the law that give tax credits to consumers who buy EVs and to manufacturers. Trump’s running mate, J.D. Vance, dismissed as “table scraps” a $500 million grant that GM had received to save 650 jobs and create 50 new ones by converting a Michigan Cadillac plant to EV production.
Weaker emissions standards and a reduction in incentives from the IRA would mean that the EV and battery factories automakers are currently building would have less local demand for their products. Automakers that sell most of their products in this country would be in the awkward position of managing a slow shift to EVs here while other major markets are moving much more quickly.
“If you’re transitioning a little bit slower than the rest of the world, then you can basically forget being competitive on a global stage,” said William Roberts, senior research analyst for Rho Motion, interviewed at the conference.
This would be a big step away from the idea that the United States is a global leader in the auto industry.
China, meanwhile, has built an EV industry, led by BYD, that already is leaving others in the dust.
Low-cost Chinese EVs have been kept out of this country by tariffs Trump put on a wide range of goods from China and Biden maintained. Both Trump and Biden accused China of unfair practices that have kept the prices of its vehicles artificially low. This year, Biden ratcheted up the tariff on Chinese EVs from 25 percent to 100 percent, and proposed another potentially potent trade barrier—a ban on import or sale of vehicles that contain specific kinds of hardware or software that the administration says could allow foreign adversaries to collect sensitive data.
Analysts think such measures could help in the short term if the U.S. uses them to gain breathing room to develop its own EV industry and supply chains. It could avoid the kind of losses that the U.S. solar module industry suffered at the hands of China, said Wendy Cutler, vice president of the Asia Society Policy Institute, at a recent forum her group co-hosted.
“I think the administration has learned from past efforts that did not materialize, where actions were taken against Chinese imports too late, and our industries were injured and … were not able to recoup,” said Cutler, a trade negotiator in President Barack Obama’s administration.
But U.S. tariffs are not going to stop the transition to EVs globally, nor have they kept Chinese companies out of the U.S. Geely, based in Hangzhou, China, owns Volvo and Polestar and sells those models in the United States. The brands are available tariff-free as long the individual vehicles aren’t built in China. And BYD has been manufacturing electric buses in Lancaster, California, since 2013.
Analysts say if tariffs are not coupled with strong policy to develop a domestic EV industry, the U.S. will fall further behind. Already, BYD and other Chinese automakers are making inroads in the Americas.
“Doing My Bit” on the Environment
Paulina Hernández had never heard of BYD, but started noticing “a ton” of their cars in the thick Mexico City traffic, and her husband pointed out the showroom near their home. When Hernández stopped by the BYD Santa Fe dealership, she bumped into a cousin who was also scoping out EVs. He ended up buying a BYD model before she did.
The high cost of gasoline (recently $4.79 a gallon in Mexico City—50 percent above the U.S. average) was one of many reasons Hernández looked at buying an EV. With an electric car, she’d also have reduced “tenencia” (road tax) and no emissions inspections costs. EVs are also exempt from Mexico City’s “no hoy circula” rules, which bar certain cars from driving on certain days in order to cut the air pollution that settles in the city’s bowl-like geography.
“Firstly, [I was motivated by] savings, secondly, by doing my bit for the environment,” she said.
Hernández’ biggest question—the same one most buyers have, according to the BYD Santa Fe sales team—was about “autonomía,” or autonomy. English speakers call it “driving range.” Hernández felt BYD’s plug-in hybrid King, with its gasoline back-up, would alleviate her worry of getting stuck far from a charging station. Eventually, she hopes to install a charger in her apartment building garage. “I’ll have to figure it out,” she said.
Paulina Hernández learns about her new BYD King plug-in hybrid from sales rep Veronica Montoya at the Santa Fe showroom. Credit: Natasha Pizzey
The company’s plug-in hybrids are proving popular with customers like Hernández who have to make long commutes, said Paloma Vargas, general manager of the BYD Santa Fe location. Globally, about half of BYD’s sales are hybrids, but the percentage is higher in Mexico and at BYD Santa Fe, it’s about 70 percent.
“We will continue having both options because we have good demand in both options,” said Oscar Hernández, BYD Mexico’s product and training manager (no relation to Paulina).
He says that a wide variety of offerings is how the company has distinguished itself from Tesla—where he worked for six years in Mexico City before moving to BYD last year. “We have products for almost every kind of customer—the customer that doesn’t have a big income, for example,” Hernández said. “And we have these luxury vehicles also. That’s the depth of development we have, to offer an electric car all customers can have.”
The Threat From China’s Largest Private Employer
BYD’s lowest price car in Mexico, the all-electric Dolphin Mini, sells for about $18,000, less than half of Tesla’s lowest-price model. In China, BYD offers a sporty Seagull model, also fully electric, that sells for $12,000.
BYD says it has been able to produce lower-cost cars in part by manufacturing its own components—particularly its Blade Battery, which relies on lithium-iron phosphate (LFP) technology instead of expensive nickel or cobalt. It’s more durable and less prone to overheating than nickel-based batteries. And while that can mean less driving range, BYD has sized its batteries and vehicle platform to deliver competitive range.
The BYD Dolphin stands outside the company’s Santa Fe showroom in Mexico City. The all-electric Dolphin Mini is the lowest price car the Chinese EV maker sells in Mexico, at a price of about $18,000 USD. Credit: Marianne Lavelle/Inside Climate News
The company started 30 years ago as a maker of inexpensive batteries in China’s electronics industry center, Shenzhen. The company now has 30 industrial parks and production sites worldwide and is China’s largest private employer, with 900,000 people on its payroll. It boasts a research and development department of 110,000 people, more than any other carmaker in the world.
BYD has flourished with the backing not only of the Chinese government but outside investors including Warren Buffet, who only recently cut back his stake in response to growing trade tensions with China.
This year, The Wall Street Journal described Ford Motor chief executive Jim Farley’s May visit to China, where he watched engineers dissect a BYD vehicle “to reveal elegant, low-cost engineering,” and reported that Farley told a fellow Ford board member the cars posed “an existential threat.”
BYD is on a global expansion spree, opening a factory in Thailand in July, with another under construction in Brazil, and another planned in Hungary. The company sees Mexico as a potentially fertile frontier, Oscar Hernández said. The country has seen strong increases in car sales over the past three years, with analysts predicting it will soon rank among the top 10 nations in passenger vehicle sales.
Oscar Hernández, product and training manager for BYD Mexico, is seen at the company’s headquarters in Mexico City. Credit: Marianne Lavelle/Inside Climate News
EVs are still a small part of the Mexican market—about 2 percent of sales, according to the most recent government figures, although some key companies, including BYD, are not included in that count. The Mexican government’s figures show EV and plug-in hybrid sales of about 23,800 through September 2024, already 20 percent higher than 2023’s full-year sales and more than double those of 2022. But BYD alone says it is on track to sell 50,000 vehicles this year in Mexico.
“We have a lot of potential here in Mexico, because of the gasoline cost, the incentives of the governments, and also just the volume of the market,” Hernandez said. “We have the potential to be in one of the better places among the [manufacturers] selling cars.”
U.S. Politicians Focus on Imports, As China Crushes Competition Abroad
BYD has repeatedly said that it has no plans to send its cars into the U.S. market, either from China or Mexico. BYD Americas CEO Stella Li has called the U.S. market “complicated” and “very confusing” because of conflicting politics around EVs.
But in Congress, there has been bipartisan uproar over fears that BYD and other Chinese EV makers will manufacture in Mexico to export their products duty-free into the United States under the U.S.-Mexico-Canada Free Trade Agreement. Mexico last year surpassed both China and Canada to become the No. 1 trade partner of the United States, and the largest part of that trade, accounting for 22 percent, is automotive.
Trump, whose administration negotiated the current free trade agreement with Mexico, has proposed tariffs on vehicles from Mexico that legal experts say would violate that treaty and possibly other U.S. law. “I will impose whatever tariffs are required—100 percent, 200 percent, 1,000 percent,” he said in an Oct. 13 speech at the Detroit Economic Club. “They’re not going to sell any cars into the United States with those plants.”
Harris is expected to keep in place Biden’s 100 percent tariffs on Chinese-made EVs, as well as the pending ban on vehicles with Chinese connectivity software, which experts believe together would be an effective approach to prevent them from entering via Mexico.
“The new regulations could cut a wide swath,” wrote analysts at Rice University’s Baker Institute for Public Policy, noting that they would likely stand up to legal challenges because of their basis in national security concerns.
In addition, Trump and Harris both have said they would use a window that opens in 2026 to renegotiate the trade agreement with Mexico. Harris was one of just 10 senators to vote against what she calls “Trump’s trade deal” with Mexico.
But some analysts in Mexico say U.S. politicians are missing a far bigger issue as they focus on preventing Chinese-made EVs from crossing the border.
“What is going on is that cars manufactured in China are crushing the competition in the Mexican market,” said Enrique Dussel Peters, an economist at Universidad Nacional Autónoma de México (UNAM) and the coordinator of its Center for Chinese-Mexican Studies.
He points out that currently no cars are being manufactured in Mexico by BYD or any other Chinese company. (Only one Chinese automaker, JAC, has a small plant in Mexico that assembles cars from kits imported from China for sale in Mexico.) But Chinese cars, which two years ago were not even a blip in the Mexican car market, in 2023 made up nearly a quarter of all vehicle sales in Mexico.
A Factory That May Never Be Built
One illustration of how the global market is being transformed is Tesla’s decision to put an abrupt halt to its big plans in Mexico.
In March 2023, Musk announced Tesla would make one of the largest auto industry investments ever in Mexico—a $5 billion new gigafactory in the state of Nuevo León on the Texas border. Musk obtained huge subsidies and infrastructure-building commitments from Mexico. And according to Bloomberg, Chinese parts suppliers began setting up plants nearby at Musk’s invitation.
But in July, after Musk endorsed Trump, he announced that Tesla’s Mexico gigafactory plan was “paused,” awaiting the results of the U.S. presidential election. “Trump has said he’ll put heavy tariffs on vehicles produced in Mexico,” Musk said. “It doesn’t make sense to invest a lot in Mexico if that is going to be the case. So we kind of need to see the way things play out politically.”
Some observers have doubts Tesla’s plan will go forward, no matter who is elected U.S. president. Tesla already has more global factory capacity than vehicle sales, and although the company recently turned in strong earnings due to sales of big energy storage systems and other factors, its vehicle sales over the first three quarters of 2024 slumped 2 percent below sales in the same period of 2023. BYD has seen its sales grow 30.7 percent over the same time frame, and some of that was due to its brand new business in Mexico.
Tesla’s Nueva León factory “will never be built,” predicted Dussel Peters, the Mexican economist. “The situation since March of 2023 to today has changed dramatically for Tesla. The competition with Chinese producers is substantial. If they want to build another gigafactory producing 1 million EVs, I don’t know where they are going to sell them.”
A 15-Year Head Start on the EV Race
China’s global dominance will continue to grow as the world transitions to electric transportation, experts say, because of the investment China has put into building its EV industry and supply chains—$230.9 billion between 2009 and 2023, estimates the Center for Strategic and International Studies.
“China has a 15-year or so head start on transformative technologies and supply chains related to EVs,” said John Bozzella, CEO of the U.S. auto industry’s main trade group, the Alliance for Automotive Innovation, at the recent Asia Society Policy Institute forum. “We are in the midst of a transformation in the United States, and it’s going to require hundreds of billions of dollars of capital.
“I think the question now is how do policymakers think about the need for a competitive auto industry in the United States,” Bozzella said. Although he said he would not discuss election outcomes, it is clear that the most significant investment that the United States has made in the EV transition is at stake in the presidential race. That is public and private investment triggered by the Inflation Reduction Act: $58.4 billion so far for battery manufacturing and $171.1 billion for zero-emissions vehicle manufacturing, according to the Clean Investment Monitor.
Harris has made clear she intends to keep that investment going. “I will make sure that America—not China—wins the competition for the 21st century,” Harris said at an Oct. 4 rally in Flint, Michigan. “We will ensure that the next generation of breakthroughs, from advanced batteries to electric vehicles, are not only invented but built right here in America by American union workers.”
Countering the ads that Trump is running in Michigan, Harris said, “Contrary to what my opponent is suggesting, I will never tell you what kind of car you have to drive.”
“But here’s what I will do,” she said. “I will invest in communities like Flint, which helped build the auto industry and the UAW. We will retool existing factories, hire locally, and work with unions to create good-paying jobs.”
Trump has characterized the pursuit of electric vehicles as a losing proposition for the U.S. auto industry. “If I don’t win, you will have no auto industry within two to three years,” he said at one recent rally in Detroit. “You will not have any manufacturing plants. China is going to take over all of them because of the electric car.”
Trump has toned down his anti-EV rhetoric somewhat since teaming up with Tesla’s Musk, who has donated at least $118.6 million to his reelection effort. “I’m for electric cars,” Trump said at a rally in August in Atlanta. “I have to be because Elon endorsed me very strongly.” But in his Detroit Economic Club speech, he repeated his view that EVs were for a “certain group of people,” but not those who needed to go long distances. Trump noted that U.S. carmakers make most of their profits on pickup trucks, and he said he planned to boost all truck and auto sales by making interest on vehicle loans tax deductible.
“We have more oil and gas, we have more liquid gold under our feet,” Trump said. “So why would we do the batteries? Where China has that, we have liquid gold.
“Vote for Trump and the gasoline engine will be here for a long, long time,” he said.
An Orchid, and Voice Control
At the BYD Santa Fe showroom in Mexico City, the sales team plans personalized celebrations when each EV is delivered to a new owner. They play a customer’s favorite song, or serve her favorite cookies, or invite family members for a surprise party at the showroom.
For Paulina Hernández, it was a simple pink orchid with a note referencing her yoga expertise: “You’ll enjoy driving your BYD King as much or more than a ‘sun salutation.’”
Paloma Vargas, general manager of the BYD Santa Fe showroom, calls the Song Plus hybrid sedan the “queen” of the company’s model line. Credit: Marianne Lavelle/Inside Climate News
Hernández set the flower on the passenger seat while she practiced charging the vehicle, using the rotational navigation screen and testing the “Hi BYD!” voice control system.
“I think it’s important to try this technology that’s replacing old stuff and making certain things better,” Paulina Hernández said. “We’ve got to give it a shot.”
Natasha Pizzey in Mexico City contributed to this report.
This story has been updated to correct Paulina Hernández’ comments about installing a charger.
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Featured image: Paulina Hernández takes time to learn about her new BYD King plug-in hybrid sedan from sales rep Veronica Montoya at the BYD Santa Fe showroom in Mexico City. Credit: Natasha Pizzey
