Chinese Auto Firms Pause Mexico Plants Amid USMCA Trade Doubts

6 days ago

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By Óscar Goytia | Journalist & Industry Analyst – Fri, 10/02/2026 – 12:15 Idioma Leer en Español DIA assistant 1.0x ✕

Major Chinese automakers have put their multi-billion-dollar assembly plant plans in Mexico on hold due to regulatory uncertainty surrounding the USMCA and heightened geopolitical pressures from Washington, trade experts and industry executives confirmed.

Despite the temporary freeze, incumbent legacy automakers are preparing for Chinese-branded vehicles to roll off Mexican assembly lines within two to three years.

Automotive giants including BYD, Chery Motors (operating as Chirey in Mexico), MG, Geely, Great Wall Motors, and Guangzhou Automobile Group (GAC) have all delayed or paused planned manufacturing projects across the country. The stoppage comes amid strict economic security policies enforced by the White House aimed at curbing Beijing's involvement in North American supply chains.

"There is no lack of interest in the Latin American market, but rather growing legal uncertainty and intense geopolitical pressure from the United States," said Kenneth Smith, former chief USMCA negotiator for Mexico.

The primary catalyst for the delay is the upcoming joint review of the USMCA. During the transition from NAFTA to the USMCA, the Regional Value Content (RVC) requirement for light vehicles rose from 62.5% to 75%. Asian OEMs now fear that future negotiations will establish explicit caps on the percentage of Chinese-sourced components and raw materials permitted in Mexican-built vehicles to qualify for preferential duty-free trade.

"What is a fact for China is that at this moment they have no guarantees as to how the rules of origin will turn out. That is what worries the Chinese automotive industry, and they are going to wait and see what happens in the coming months," Smith noted.

The pause contrasts with developments in South America. Chinese automakers have committed over US$6.5 billion in investments to establish manufacturing hubs in Brazil. However, trade analysts emphasize that Chinese brands retain a long-term view of Mexico due to robust domestic sales and its position as an export launchpad into Latin America and, regulatory environment permitting, North America.

Among the stalled projects:

MG (Morris Garages): Outlined plans in November 2024 to invest US$1.05 billion to build an assembly plant, but has yet to define a location or start date.
BYD: Cancelled plans to construct a facility after publicly signaling interest on two separate occasions, including a June 2025 announcement by General Director Jorge Vallejo regarding a major manufacturing complex.
GAC: Announced in April 2026 that it would begin semi-knocked-down (SKD) assembly in thesecond half of the year—potentially utilizing existing infrastructure from Japanese partners Honda or Toyota—before postponing startup to the final quarter of 2026 without specifying a location.
Geely: Evaluated acquiring the former Mercedes-Benz production lines at the COMPAS plant in Aguascalientes, but failed to finalize a transaction.
Chirey: Confirmed in April that it was seeking local joint-venture partners to manufacture in Mexico, describing local assembly as an operational necessity rather than a preference.

While Chinese investments remain frozen, incumbent manufacturers warn that local production is inevitable. Speaking at a Sep. 28 briefing at Nissan Motor headquarters in Yokohama, Japan, Nissan Americas President Christian Meunier stated that Chinese manufacturers will achieve localized operations in Mexico within 24 to 36 months.

Imported Chinese vehicles currently face a 50% tariff imposed by the Mexican government. Local manufacturing would allow Chinese OEMs to bypass those tariffs partially or entirely, creating significant price competition.

"Cost competitiveness is going to be the golden rule over the next five years," Meunier said, noting that Nissan is overhauling its supply chains and product development to cut costs. "Many OEMs, especially in the West, but also in Japan, have not been aggressive enough in reducing costs. We have a very solid supply chain and reasonable costs, but not good enough to compete head-to-head with companies like BYD."

Meunier added that penetration by Chinese automakers into the US market is not expected for at least five years, citing opposition from American automakers over low retail pricing in other regions.

"Some call it dumping," Meunier said regarding Chinese pricing strategies. "It is very complicated for an OEM to compete with a government, which is basically what it is."