The rise of Chinese electric vehicles in the South American market, especially in the Brazilian market, has attracted attention with an eight-fold year-on-year increase in sales. However, when the U.S. announces tariffs of up to 100% on Chinese EVs and presses Mexico to stop incentives for Chinese automakers, will Chinese EVs be able to sustain this growth in the South American market? How do the market dynamics behind this relate to international relations?

"I think this is the relationship between the supply side and the international demand side. [China] is not trying to deliberately occupy a certain country's market, or to pull some front. As long as there is demand in the other market, we will meet the demand through trade. Chen Wenling, chief economist of the China Center for International Economic Exchanges and an expert of the academic committee of the Center for Globalization (CCG), told The Paper (www.thepaper.cn) at the 10th China and Globalization Forum held on May 26.

Behind the U.S.'s "encirclement, pursuit, and interception" of China's electric vehicles is the rapid development of China's auto exports. According to CCTV News, in 2023, China's automobile production and sales will both exceed 30 million, with a year-on-year increase of 11.6% and 12% respectively, hitting a record high and maintaining the world's first place for 15 consecutive years; Vehicle exports totaled 4.91 million units, up 57.9% y/y, making it the world's largest vehicle exporter for the first time.

The development of new energy vehicles is more prominent. According to the data of the China Passenger Car Market Information Association, China's new energy vehicle exports in 2023 will be 1.203 million units, a year-on-year increase of 77.6%, and an average of about 26.21 seconds will have a new energy vehicle "go overseas". In the first two months of 2024, China's production and sales of new energy passenger vehicles accounted for 62% of the world's overall production and sales of new energy vehicles.

It is particularly noteworthy that in the context of the European Union and the United States successively using countervailing investigations and high tariffs to curb the entry of Chinese electric vehicles into the European and American markets, Chinese electric vehicles are selling well in South America.

On April 19, 2024, at the International Container Terminal in Taicang Port Area of Suzhou Port, a large number of new energy vehicles are neatly lined up and are being shipped to all over the world. Visual China data map

The Nihon Keizai Shimbun website reported on May 24 that in the first four months of 2024, Chinese electric vehicle sales in Brazil reached 48,000 units, an increase of eight times that of the same period last year. The Brazilian government is also actively promoting the development of the electric vehicle industry, with BYD and Great Wall Motor planning to build factories in Brazil. According to Bloomberg data quoted by the overseas network, BYD's factory in Brazil will have an annual production capacity of 150,000 vehicles and promises to create 5,000 jobs, but the actual number may be more than double this number. This is only direct employment and does not include other benefits along the supply chain.

The rise of Chinese electric vehicles in South America is not limited to Brazil. According to the 2023 Latin American electric vehicle sales report released by the CleanTechnica website in the United States, Chinese automakers stand out in South America and "occupy a dominant position". Taking Costa Rica, Uruguay, and Colombia as examples, the three countries with the highest market share of electric vehicles in Central and South America, in their respective "10 best-selling electric vehicle models" lists, Chinese cars are on the list of 6, 7, and 6 respectively, and all rank among the top three in terms of sales.

However, the United States does not seem to want to sit idly by and watch Chinese electric vehicles become popular in the South American market. Under pressure from the United States, Mexico has closed the door to "incentives" for Chinese electric vehicles. Reuters previously reported that some U.S. politicians believe that there is a possibility for Chinese automakers to open the U.S. market by building factories in Mexico first, so tariffs should be imposed, and "suggested" that Mexico stop incentives for Chinese electric vehicle companies. In particular, pressure from the Office of the U.S. Trade Representative (USTR) to exclude Chinese automakers from the free trade zones established under the North American Free Trade Agreement (NAFTA).

In January, senior Mexican officials said in talks with a Chinese electric vehicle company that they would not give incentives as they have done in the past and would suspend any future talks with Chinese automakers, according to sources.

Under the USMCA, as long as more than 75% of a car's components are produced in North America, it can enter the U.S. market duty-free. Chinese automakers such as BYD and Chery are also planning to build factories in Mexico.

"The Biden administration's announcement of high tariffs on Chinese electric vehicles is a direct increase in China's electric vehicles on the one hand, and pressure on Mexico on the other." "As a result, Mexico will be more affected by NAFTA than by 'countries of the South,'" Chen said. ”

At the meeting on the 26th, Chen Wenling also pointed out that the confrontational competition and encirclement and suppression of the scientific and technological development of some countries against other countries have actually brought a major negative impact on the global scientific and technological revolution.

"The so-called overcapacity in China threatens the survival of factories around the world," Chen said, as the United States used to impose new tariffs on Chinese goods, including electric vehicles. The United States is also trying to co-opt the European Union and the countries of the South to take corresponding measures. However, far from posing a threat to the development of industries in the Global South, China's exports of superior capacity are necessary for the development of these industries.

"Our (China's) electric vehicles have advantages in terms of price and use (energy transition); Second, we have a basis for cooperation with developing countries in building the Belt and Road Initiative, which is the advantage of cooperation. Third, China never raises prices, deprives consumers of other countries, or imposes something on consumers in other countries. If there is a demand for new industrial cooperation in the local area, it is decided by the countries or enterprises of both sides. Chen Wenling told The Paper, "Therefore, there is no need to deliberately occupy a certain regional market, and our country's superior production capacity, such as high-speed rail and photovoltaic, is not dependent on the state to force negotiation and output." It's an equal deal that happens naturally. ”

"The combined GDP of the Global South now accounts for more than 60% of the world's GDP. Changes in the structure of the economy will lead to a series of changes, and many things in the world need to be redefined. Chen Wenling pointed out that the rise of the Global South is formed by emerging market countries and developing countries based on similar historical circumstances, realistic development stages, common development goals and common aspirations.

"This demand is manifested in the economic aspect, in the desire of the countries of the South to obtain equal access to wealth through work; This has further led to the dissatisfaction and adaptation of the countries of the South to the international rules formed by the existing unipolar hegemony. Chen Wenling further analyzed.