15 Aug 18

Latin American (Electric) Vehicles Made by China

Over the last decade, Chinese car manufacturers have entered the Latin American market, with a significant increase over the last couple of years, which is part of a deliberate Chinese strategy. 

Made by China 2025

In 2015 China launched its economic strategy Made by China 2025, aiming to progress the whole manufacturing sector by 2025. It identified 10 priority sectors, and new energy vehicles and equipment are one of them. Within 10 years, China wants to build a globally competitive automotive industry, and targets the sale of 35 million vehicles by 2025, of which about 7 million new energy vehicles, including sales abroad. Latin America is an interesting export market since customers are keen to buy the generally more affordable Chinese cars. 

Rewind, before 2015

Even before this strategy, the China-Community of Latin American and Caribbean States (CELAC) Forum was created in 2014, and the China-Latin American and Caribbean Countries Cooperation Plan (2015-2019) targets increased mutual investments in the manufacturing industry, and cooperation in fields like automotive equipment. CEPAL, the Economic Commission for Latin America and the Caribbean, have calculated that the Chinese automotive industry has already invested about $6 billion in the region in 2013, and imported about 286,500 cars to South America. 

Belt and Road

Another important economic and geopolitical strategy of China is the Belt And Road Initiative, launched in 2013. Although Latin American countries are no part of the original strategy, they have received much Chinese investments; approximately $140 billion since 2005, according to the Inter-American Dialogue’s China-Latin America Finance Database.

Further on, Chinese companies are looking for ways to diversify into various sectors, rather than only raw materials, such as car manufacturing, and car-hailing. The Chinese car manufacturer Great Wall, for example, installed manufacturing plants in Uruguay, Venezuela, and in Brazil; and BYD (Build Your Dream) has an EV factory in Brazil, while the Chinese ride hailing company Didi acquired the Brazilian ride hailing company 99.

Additionally, Brazil has important investment agreements with China, with among others the import of Chinese car parts, and Chile has had a free trade agreement with China since 2005, Costa Rica since 2007, and Peru since 2010. All these agreements resulted in an important influx of Chinese car and car parts in Latin America. As a result, China is among the most important trade partners of many Latin American countries, such as Brazil, Chile and Argentina.

The Future – Push and Pull

The Chinese automotive share in Latin America, and moreover the electric vehicle market, can grow in the future because of Central and South American incentives for the EV market. Moreover, with the vicinity of the world’s biggest lithium resources in Chile, Argentina and Bolivia, setting up EV plants in the region might be even more attractive. 

Besides pushing factors, the economic policy of President Trump to keep jobs in the US, can be an important pulling factor for Chinese investment as well. The cancellation of the Ford plant in San Luis Potosi, Mexico, for example, creates a gap that the Chinese Great Wall Motor is considering to fill in with an own factory.

Authored by: Fien Van den steen