Beijing Pauses Approval For BYD's Mexico Plant Over U.S. Tech Leak Worries: 'Biggest Concern Is Mexico's Proximity To The U.S.' - BYD (OTC:BYDDF), BYD (OTC:BYDDY)

Beijing has reportedly put on hold the approval for BYD Co Ltd. BYDDY BYDDF to set up a manufacturing plant in Mexico amid fear of key technology leakage to the U.S.

What Happened: For Chinese automakers to manufacture overseas, they need approval from China’s commerce ministry. The ministry has not yet given the go-ahead due to concerns that Mexico could gain unrestricted access to BYD’s advanced technology and know-how, possibly granting the U.S. access to it, according to a report from the Financial Times on Thursday.

BYD, China’s largest electric-vehicle maker had previously announced plans in 2023 to establish an automobile plant in Mexico. The company also expressed intentions to manufacture cars in Brazil, Hungary, and Indonesia. The proposed Mexican plant is expected to generate 10,000 jobs and manufacture 150,000 vehicles per year.

“The commerce ministry’s biggest concern is Mexico’s proximity to the U.S.,” a source familiar with the matter told FT. Beijing is also focusing on projects in countries participating in China’s Belt and Road Initiative infrastructure development program.

BYD’s Executive Vice-President, Stella Li, stated that the company has “not decided [on] the Mexico facility yet”. In February 2024, Zou Zhou, manager of BYD Mexico, reiterated that the company was exploring the possibility of establishing an electric vehicle (EV) plant in Mexico.

Why It Matters: The shifting geopolitical dynamics and Mexico’s efforts to maintain relations with the US have also contributed to the delay. The U.S. suspects that Mexico serves as a “backdoor” for Chinese goods to enter the country duty-free under the North American Free Trade Agreement.

In retaliation, Mexico has imposed tariffs on Chinese textiles and initiated anti-dumping investigations into steel and aluminum products from China.

This delay in approval comes at a time when BYD is making significant strides in the EV market. On Monday, BYD unveiled a groundbreaking charging system that can fully charge an EV in just five minutes, potentially eliminating one of the biggest barriers to EV adoption worldwide.

This technological breakthrough has strengthened BYD’s competitive edge over other EV makers, including Tesla Inc. TSLA. The delay in setting up the Mexican plant could potentially impact BYD’s global expansion plans and its position in the EV market.

The US-ADR of BYD climbed 12.2% over the past month, as per Benzinga Pro. The ADR climbed 2.47% on Tuesday to close at $52.67.

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