HIDALGO, MEXICO — Mauricio Gonzlez slid into the driver’s seat of an SUV that had just come off the factory line. Like most people who don’t drive electric vehicles often, he couldn’t figure out how to start the engine. Once he did, he smiled and slammed his foot on the accelerator.
“I think it’s a very nice car,” Gonzalez said from behind the wheel. “It’s very powerful, and I think it’s very comfortable, also.”
What Gonzalez was really excited about was that the SUV — a model SEI3 by the Chinese auto maker JAC Motors — was assembled in the central Mexican state of Hidalgo. Gonzalez, an undersecretary for the state’s economic development agency, spends much of his time trying to convince corporations to take advantage of the flat lands in his state, set up shop and hire workers.
The JAC plant in the industrial city of Ciudad Sahagun in Hidalgo, operated in partnership with the Mexican auto maker Giant Motors, employs roughly 200 people and is expected to eventually employ about 1,000 people, Gonzalez said.
In Mexico, it’s become popular among business and government types to say they’re preparing for the impending negotiation of the North American Free Trade Agreement (NAFTA). They say they want to diversify their business interests beyond deals with the United States. And in Mexico’s booming car industry, one big new player — China — is already moving in.
JAC is one of three automotive companies owned by the Chinese government with a presence in Mexico. (The other two are the FAW Corp. and BAIC Group). In March, JAC started selling its SUVs at a dealership just outside Mexico City and the central city of Puebla.
JAC is collaborating with Giant, a company started 10 years ago by a group of Mexican investors, including the famous Carlos Slim, who was once ranked the wealthiest man in the world. They’ve already partnered with FAW Corp. to assemble commercial trucks here. And at least for now, Giant’s long-term plan doesn’t include American consumers, said Elias Masri, chief executive of Giant.
“The main issue is to make a Mexican product, and our main goal today is Mexico and Latin America,” Masri said.
Mexico has options outside of North America, in part thanks to free trade agreements with over half the market for new vehicles in the world, said Kristen Dziczek, an analyst with the Center for Automotive Research in Ann Arbor, Michigan.
Without a doubt, Mexico is closely linked to the United States, Dziczek said. She estimates that about two-thirds of the U.S. investment in Mexico comes from the automotive sector. But what’s already in Mexico won’t just evaporate if NAFTA disappears.“Right now, they’re making one in five vehicles for non-NAFTA export, and we see that rising in just three or four years to one in three," Dziczek said.
One possible new partner for Mexico is China. Dziczek said that with Mexico’s established ecosystem of car makers and part suppliers, it’s a good place for Chinese companies to get a toehold as they seek to expand outside of China.
Although it should be noted that Chinese presence in Mexico is not new, said Enrique Dussel Peters, the director of Center of Chinese-Mexican Studies at the National Autonomous University of Mexico.
China is Mexico's second largest trading partner since 2003, Dussel said. But, historically, Mexico has competed with China to export to the United States and elsewhere. And Dussel said that in 2016, Mexico’s import-export relationship with China was 13 to one.
According to Dussel, Mexico could benefit more, but that at least for now it lacks the government, business and academic infrastructure to fully exploit that relationship.
“And so if we do not make our homework, we will not be able to sell tequila, no?” Dussel said. “Less aside other more sophisticated goods.”
Back inside the JAC Motors SUV, Gonzalez is celebrated the Chinese investment in the state of Hidalgo. But he doesn’t want companies to come exclusively from one place, whether it’s the United States or China.
“That's why we're looking forward to promote the state of Hidalgo in Asia, in particular, also in Europe,” Gonzalez said.
As it turns out, most people betting on whether automotive investments will become a long-term strategy from China are being cautious.