Foreign brands have long ruled the auto markets in Mexico and Brazil. Nissan is a top choice for shoppers in Mexico while in Brazil Fiat was the top-selling brand last year. Shoppers in both countries, however, are now increasingly considering cars from another country: China.
China’s rising auto industry has long been accused of planning to “take over” the overseas markets with advanced electric vehicle technology and an iron grip on the battery supply chain. This has led to accusations of “dumping” cars into foreign markets to compete in unfair ways. But if a takeover is happening anywhere, it seems to be happening in the global South; as of April, Brazil surpassed Belgium as the top export market for Chinese EVs.
As sales in their home market slow, Chinese automakers—all of whom have staked their future on electric vehicles and plug-in hybrids—are looking to overseas markets to boost sales. And while the Chinese brands’ inroads into Europe may make up most of the headlines in the West, two of their biggest targets are Latin America, as well as Southeast Asia countries like Thailand and Indonesia.
Those regions “are expected to grow faster than the Chinese market,” said Dave Steinert, Alix Partners’ director in the automotive and industrial practice. Hitting walls at home, the Chinese automakers are eager to expand outward. It’s not something the U.S. has seen yet, but it’s very much a reality elsewhere. Indeed, Chinese brands captured nearly 10% of the passenger vehicle market in Mexico in 2023 and their market share there continues to grow.
Meanwhile, in Central and South America, Alix Partners expects Chinese brands’ market share to nearly triple to 28% by 2030.
There’s a catch, however. Chinese vehicle sales in Latin America are still by and large focused on traditional internal combustion engine vehicles. The market for EVs and hybrids is still small, though it is growing. And Chinese EV brands are already responsible for the majority of EV market growth there.
Southeast Asia is a different story. Chinese EV makers are getting more support from local governments and the EV markets there are growing fast. Chinese brands are both driving and positioned to take advantage of that growth.
From Mexico Onward
For hybrids in Mexico, the Toyota Prius is still the king. But the Chinese JAC E10X is in second place, and automakers like BYD, Great Wall Motors, Geely, and Guangzhou Auto also have big plans for the Mexican market.
It's not the EVs that making the biggest inroads in Mexico right now. “The rub is that they export mostly ICE vehicles and will likely for the foreseeable future,” said Tu Le, managing director of Sino Auto Insights. (While located in North America, Mexico’s auto market tends to be counted separately from the U.S. and Canada; it has a range of brands and models that are not sold in either neighbor to the north.) But as China Inc. looks to an electric future, it has big plans for Mexico.
Chinese brands are also moving into Brazil, where conglomerates like General Motors, Fiat and Volkswagen are some of the biggest players in the world’s sixth-largest car market by sales. EV sales are starting to grow more there, too; their nearly 94,000 units accounted for 4.3% of Brazil’s vehicle market in 2023, up from just 0.5% in 2022. BYD and Great Wall in particular are strong sellers.
However, the Brazilian government has opened dumping probes into other Chinese products and may lose its tolerance for Chinese EVs as well. Brazil’s government is more interested in promoting alternative fuels, Le said.
“The rub here is that the Brazilian government subsidizes flex-fuel vehicles (FFVs), which can run on ethanol or normal petrol,” he said. “Eighty-three percent of passenger vehicles sold there in 2023 were FFVs. The Brazilians use the sugar cane they grow domestically to help with cleaning up their passenger vehicle market.”
Planning For The Future
Most of the EV markets in Latin America are still tiny but Chinese brands are positioning themselves to dominate those markets as they grow. “There are certainly challenges toward EV adoption (in Mexico and Brazil) although they are still both very promising opportunities long-term,” Le said.
Growth depends on policies to support EV adoption, however.
“The market share of Chinese (EV makers) depends overall on electrification trends, said Sidong Fan, a senior analyst with S&P Global Mobility. “If the government sets a goal for EV market share, then of course Chinese (EV makers) can take some of this market share.”
Mexico is one of the world’s most important auto manufacturing countries, providing lower-cost production to the U.S., Canada, Europe and beyond. That’s increasingly true in the electric world. GM's plant in Ramos Arizpe produces the Chevy Blazer EV and Equinox EV, among others, and companies like BMW and Kia either have or are likely to have plans to add more. What the country has not had much of is incentives for purchasing EVs. That could change with the election of Mexico’s new president, an energy and climate scientist.
“In order for Mexico to see the type of adoption we've seen in the U.S., EU and China, the Mexican government will need to put its money where its mouth is and subsidize the sector to make EVs more affordable,” Le said.
But Mexico has a fine line to walk when it comes to more automakers seeking to build cars there. Chinese automakers, including BYD, Chery (known as Chirey in Mexico) and Great Wall, are building or planning to build EV manufacturing plants in Mexico to serve the local market and for export to Central America, S&P’s Fan said. That has already drawn the ire of the U.S., Mexico’s most important trading partner, out of fears that it could be a waystation to bring Chinese EVs stateside. “The natural reason (to build a plant in Mexico) is to be close to the U.S.,” said Alix Partners’ Steinert.
Under the terms of the U.S.-Mexico-Canada Agreement, the trade deal that replaced NAFTA in recent years, Chinese EVs produced in Mexico would be able to enter the U.S. market tariff-free if they meet certain North American content requirements.
But that has been thrown into doubt as the U.S. government debates creating laws specifically to block Chinese brand EVs from entering the U.S. from Mexico. The Biden Administration this year announced 100% tariffs on Chinese-made EVs in America, and said it will ban any “connected” cars with Chinese-sourced hardware and software. In theory, that should keep those cars out of the U.S. for now, even if they are made by our neighbor to the south.
Still, with domestic production, Chinese EVs could slowly take over what EV market there is in Mexico, Steinert said.
Barriers In Brazil
Moving further south, Brazil imported $735 million worth of Chinese EVs in 2023, accounting for 92% of all EV imports. Brazil also imported $789 million worth of Chinese PHEVs last year. EV imports alone increased eighteen-fold. But those imports may slow. Seeking to develop the local EV industry, Brazil isn’t just investigating “flooding”; it has also imposed a 10% import tax on EVs regardless of country of origin which will rise to 35 percent by 2026.
Great Wall and BYD are already building plants in Brazil to serve the local market and for export, however. That will help Chinese EV makers expand across Central and South America.
Latin America’s smaller markets are also seeing an influx of Chinese brands, including EVs. Chile, for example, imported 111,108 cars from China in 2023, accounting for 39.4% of the market. And while the Chilean EV market is still small, it is forecast to grow to 1.4 million units by 2029.
Chinese EV makers are well-positioned to take a good chunk of the market in Chile and other Latin American countries.
“They are good competitive vehicles at a very competitive price point,” said Steinert” “Their attraction is a combination of the value for money and also the focus on new technology (in the vehicles.)"
Southeast Asia Throws Out The Welcome Mat
In 2023, Counterpoint Research called Southeast Asia “the world’s hottest EV market,” with sales driven by strong demand in Thailand, Vietnam, Indonesia, and Malaysia.
“Chinese [automakers] are set to become the biggest beneficiary of Southeast Asia’s appetite for EVs over the short term,” Counterpoint’s report said.
Japanese automakers, especially Toyota, have long dominated Southeast Asia’s internal combustion engine market. But their slow approach to EVs created an opportunity for Chinese EV makers, and they have moved in quickly.
Thailand in particular is emerging as a primary channel for China’s automakers to duck tariffs with local production and a growing battery supply chain. The country is becoming a kind of regional EV export hub, and the government is seizing the opportunity to rise in the world. China seems happy with Thailand too; its EV makers have committed to invest $1.44 billion in production capacity there. Seven Chinese automakers have built or plan to build EV production plants in Thailand, according to Alix Partners. Among them are BYD, Chery, Great Wall, and Changan.
Unlike Mexico, Thailand is leaning in. The Thai government aims for 30% of its annual production of 2.5 million vehicles to be EVs by 2030 and it has enacted policies to help achieve that, including EV purchase subsidies of up to 100,000 baht, or $2,944 at current exchange rates.
BYD recently opened a 150,000-unit manufacturing plant there that will export half of its output to other Southeast Asian countries and Australia, S&P’s Fan said.
While Thailand is currently Southeast Asia’s largest EV market, accounting for 55% of all EV sales in the region, Indonesia is expected to be the region’s largest EV market by volume by 2035, according to EY-Parthenon. Chinese EV makers are positioned to export there and BYD is planning to build a complete knock-down plant in Indonesia, as well, Fan said. It will build a CKD plant in Malaysia, too, he said.
Alix Partners sees Chinese brands’ share of the EV market in Southeast Asia, including EVs and plug-in hybrids, expanding from 3% today to 31% by the end of the decade, Steinert said.
As in other regions where Chinese automakers have aggressively grown market share, there may be some pushback in Southeast Asia, especially if the Chinese plant is just importing complete knock-down kits, or CKDs, from China, Fan said. With a CKD the vehicle is manufactured in one country and assembled in another. But overall, it is a net positive for the countries, he said.
“If you consider it from the perspective that China not only exports to this country but also creates jobs, a plant, and contributes to GDP, it is a win-win situation,” Fan said.
Chinese automakers’ Southeast Asian growth is mainly a threat to Japanese automakers, who have long dominated those markets. The automaker’s expansion in Latin America, especially Mexico, has more significance for the U.S., however.
To be sure, the current geopolitical tensions will likely curtail any meaningful exports of ICE or electric vehicles from Mexico to the U.S. in the near term. So for now, Chinese automakers will sell in Mexico and, when they have manufacturing plants there, export to other Latin American countries. But in the longer term, they have their eye on the much larger market to the West. And China is good at playing the long game.
When Chinese automakers build plants in Mexico, “the gold nugget you want is the U.S. market,” Steinert said.
Alysha Webb has been covering China’s auto industry since the late 1990s, including for BusinessWeek and Automotive News. See more of her work at ChinaEV.
