Carlos Slim's Giant Motors will begin manufacturing cars in Mexico to sell to Latin America in a joint venture with China's JAC Motors as some carmakers step up production in the low-cost nation despite Donald Trump's "America first" policies.
Two Chinese-designed and largely Chinese-manufactured sport utility vehicles will be launched on Tuesday as the new venture aims to cash in on Mexico's booming domestic car market.
Giant Motors, the Mexican vehicle assembler backed by the billionaire investor, will focus on domestic sales and exports to the south with the new venture, instead of looking north to the US as it aims to navigate round the policies of the US president.
"We don't depend on Nafta at all, not for exports or for supplies," said Elías Massri, Giant Motors chief executive. "For us, this is where the opportunity lies."
The 4.4bn peso ($230m) investment comes as uncertainty over the North American Free Trade Agreement, or Nafta, puts pressure on Mexico to diversify its imports and exports away from its current dependence on the US.
It also shows China making a bet on Mexico as an assembly hub for exports to the rest of Latin America.
Already Mexico has trade deals with 44 nations through a dozen free-trade agreements, and the country is used by companies such as Audi, and soon BMW, as a base for global exports.
"They have a clear intention to go global, in contrast to what we're seeing in globalised countries that want to go backwards," said Mr Massri.Brazil, Russia and the Middle East, which have been good markets for Chinese cars, have all suffered in recent months, making Mexico attractive as a stepping stone to the rest of the continent, he added.
Mr Trump has lobbied hard for carmakers to shift plants and jobs home, prompting Ford to scrap a $1.6bn factory in Mexico.Carmakers are also worried about a possible Trump tax on imports while the upcoming renegotiation of Nafta has caused deep nervousness in Mexico's most emblematic manufacturing success story.
Giant, JAC and Chori, a Japanese company also involved in the project, began hatching plans two years ago — "well before the storm" — encouraged by runaway growth in the Mexican car market, said Mr Massri.The industry had a record 2016 and domestic sales rose 6.5 per cent in February compared with February 2015.
Giant, which is half owned by an investment vehicle belonging to Mr Slim's Inbursa finance house, produces trucks and vans with another Chinese company, FAW, under a joint venture dating back 10 years.It will assemble the JAC cars at the same plant in the central state of Hidalgo."
We're not big enough to export to the US and that would require a different level of investment. But we want to be a hub for exports to Latin America . . . within four years," said Mr Massri.
Giant is also working on separate plans for electric taxis and expects two more JAC models this year. Mr Massri hopes as many as 6,000 cars and as many trucks will be rolling off assembly lines by 2021.
Additional reporting by Peter Campbell