Mexico’s proposed 50% tariff on Chinese-made electric cars could significantly impact Tesla and BYD, reshaping the Mexican EV market while benefitting U.S. automakers.
 |
| Mexico’s proposed 50% tariff on Chinese electric cars could hurt Tesla and BYD’s expansion in Mexico, while U.S. automakers may see new opportunities. Image: CH |
Mexico City, Mexico, September 13, 2025
The proposed 50% tariff on Chinese-made electric vehicles (EVs) by Mexico has sparked a wave of concern, especially for Tesla and BYD, two of the biggest players in the growing Mexican EV market. While the proposal is still pending approval by Mexico’s Congress, its potential impact could be a game-changer for the auto industry, especially in the electric vehicle sector.
For Tesla and BYD, the new tariff could mean a significant rise in the cost of their vehicles in the Mexican market. Tesla, which has been importing vehicles made in its Shanghai factory, and BYD, which has experienced explosive growth since entering Mexico in 2023, could find their competitive pricing severely impacted by the proposed tariff.
In 2024 alone, BYD sold an impressive 40,000 vehicles in Mexico, capturing almost half of the electric car market in the country. Similarly, Tesla has made significant strides with its Model 3 and Model Y cars, largely sourced from its Shanghai plant. With Mexico’s growing interest in electric mobility, both companies have had a unique opportunity to tap into the Mexican market—an opportunity that could be at risk due to the tariff.
The proposed tariff targets vehicles imported from countries like China, which do not have a free trade agreement (FTA) with Mexico. While the tariff is sweeping, it spares legacy U.S. car manufacturers—General Motors (GM), Ford, and Stellantis—under a 2003 decree. This decree allows U.S. automakers with production plants in Mexico to import a percentage of their cars tariff-free, even from countries like China.
This gives U.S. manufacturers a significant edge over companies like BYD and Tesla, which have no production capacity in Mexico and thus rely on imports. The new regulation, if passed, would benefit U.S. carmakers by allowing them to maintain competitive pricing against BYD and Tesla, which have previously capitalized on lower-priced imports from China.
The tariff also comes at a time when both Tesla and BYD were planning to establish factories in Mexico. Tesla had ambitious plans for a massive factory in northern Mexico, which would have been its largest globally, creating thousands of jobs. However, these plans have stalled due to factors like rising interest rates and economic uncertainty. Similarly, BYD abandoned its factory plans in Mexico after concerns about political pressures from the United States and trade policies.
With both companies facing obstacles in setting up local production, their reliance on imports from China makes them highly vulnerable to this proposed tariff.
For Mexico, the proposed tariff could reshape its position as one of North America’s fastest-growing car markets. The country is increasingly seen as a hub for electric mobility, with growing interest from both local and international consumers. However, the proposed tariff risks slowing down the expansion of the electric vehicle sector.
By favoring legacy U.S. automakers, Mexico’s policy could accelerate U.S. companies’ dominance in the EV market. Still, Tesla and BYD may look for ways to navigate the changes—whether by shifting production strategies, entering new markets, or seeking alternative ways to continue growing in Mexico despite the tariff.
As Mexico moves forward with the proposed policy, the implications for the global EV market are clear: legacy carmakers stand to benefit, but the shift could set back the momentum of Chinese EV manufacturers in North America.
With the political and economic landscapes constantly changing, the future of electric mobility in Mexico may hinge on the outcomes of these tariff proposals and their subsequent effects on the auto industry as a whole.