By Emily Green
MEXICO CITY, July 20 (Reuters) - Mexican sales of Chinese-brand vehicles jumped nearly 30% in the first six months of the year despite steep tariffs imposed in January that were intended to slow the rise of Asian imports, according to a sales report obtained by Reuters.
The undated report from the Mexican Association of Automobile Distributors showed Chinese brands accounted for 17% of new vehicle sales in Mexico during the first half of the year, up from 14% a year earlier, with sales climbing
to 137,525 from 107,712.
Chinese brands’ rapid expansion in Mexico has transformed the country’s auto market and alarmed U.S. officials, who fear the country could become a springboard for Chinese companies seeking to enter the U.S. and upend an industry that contributes $1.2 trillion to the economy annually.
Mexico's Deputy Foreign Trade Minister Luis Rosendo Gutierrez told Reuters the sales data is misleading because Chinese automakers began the year with sizable inventories in Mexico after front-loading shipments ahead of the tariff increase.
The real impact of the tariffs, he said, is evident in a 43% decline in imports of Chinese-brand vehicles during the first five months of the year compared with the same period last year.
"What's important is not the sales figures. What's important is that the measures have halted imports of vehicles from Asia," Gutierrez said.
The issue of growing Chinese exports into Mexico is a flashpoint in negotiations over the future of North America's trade pact, with the region's tightly integrated auto industry at the center of the debate. U.S. and Mexican officials are set to begin a third round of talks in Mexico City on Tuesday.
The jump in Chinese car sales occurred after Mexico imposed a 50% tariff in January on vehicle imports from China and other Asian countries, a measure the Mexican government said would safeguard jobs and analysts said was intended to reassure the United States.
Chinese automaker Geely posted the strongest growth in sales this year, followed by MG Motor, Changan and Chirey, according to data from the automobile distributors’ association.
BYD, China's largest automaker, remains the biggest player in Mexico’s market although sales edged down to 33,969 from 34,606, according to the data. BYD, which has aggressively expanded in Mexico, did not respond to a request for comment.
The explosion of Chinese vehicles in Mexico has been astonishing - growing from less than 1% of market share in 2020 to 7% in 2022 and reaching 17% in the first six months of the year, according to the distributors' association.
Guillermo Rosales, executive president of the association, said Chinese brands are likely to continue gaining market share in Mexico, though at a slower pace than in recent years.
“The market has become saturated with supply,” he said. “Several individual brands are selling fewer vehicles than they did a year ago, with their losses benefiting Chinese competitors.”
Even so, Rosales said Chinese automakers are likely to keep absorbing the cost of Mexico's higher tariffs rather than risk losing ground in one of the world's largest vehicle markets.
“Chinese automakers have a strong incentive to absorb higher costs than lose market share.”
(Reporting by Emily Green; Editing by Stephen Eisenhammer and Alistair Bell)
