Originally introduced to make EVs more affordable and promote sustainable transportation, the policy primarily benefited brands like BYD, MG, and JAC from China, as well as European manufacturers like Volvo, Renault, and BMW, which produce some of their models in China.
Rising Vehicle Prices Expected
dEugenio Grandio, President of the Electromobility Association (EMA), emphasized that this policy did not specifically favor China but applied to all imported EVs, regardless of their origin. He warned that ending this support could lead to higher consumer prices and reduced brand choices, potentially hindering efforts to reduce urban air pollution. Grandio highlighted that 38% of EVs sold in Mexico are sourced from China, and the removal of the tax exemption might prompt some brands to reconsider their presence in the Mexican market.
The decision to end the tax exemption comes under pressure from the United States, which fears that Chinese-made EVs could enter the U.S. market tariff-free via Mexico, potentially undermining the United States-Mexico-Canada Agreement (USMCA). In contrast, the U.S. has imposed a 100% tariff on Chinese vehicles, significantly higher than the usual 25% for other imports. A White House press release stated that this measure supports President Biden’s vision of having the future of the U.S. auto industry built by American workers.
Manufacturers Considering Alternatives
As the October deadline approaches, automakers are evaluating their options. Brands like Volvo and Zeekr are considering price subsidies or other strategies to remain competitive. The impact on vehicle prices could be significant. Grandio emphasized that the tax exemption was one of the few measures promoting electromobility, and without it, the costs would be entirely passed on to consumers.
The decision could also affect Mexico’s trade relations with other key Asian suppliers beyond China. Juan Jesús González, an innovation management expert, pointed out that countries like South Korea, Vietnam, India, Thailand, Taiwan, and Turkey could also be impacted. These countries are major suppliers of electronic components and auto parts to Mexico, and the new tariffs could raise import costs, ultimately affecting consumers. According to Leonardo Beltran, a sustainability researcher at the Institute of the Americas, the value of these vehicles must reflect the increase in tariffs.
The tax exemption has contributed to the rise in EV market share in Mexico from less than 0.5% to 1% of total vehicle sales. According to EMA, Mexico now has about 60 different EV models on the market, with brands like JAC, BYD, SEV, and MG, as well as China-made models, being the primary beneficiaries of this policy.
Source: www.mobilityportal.eu
