Mexico’s 50% Tariff Threatens Tesla and BYD in Booming EV Market

Mexico’s proposed 50% tariff on vehicles imported from countries without free trade agreements, including China, could deal a major blow to Tesla and BYD while sparing U.S. automakers Ford, GM, and Stellantis. Industry experts say the measure mainly targets Chinese-manufactured electric cars, which have rapidly gained traction in Mexico’s fast-growing EV market.

Over the past year, Mexico has raised tariffs on Chinese-made EVs from 0% to 15%, and now plans to raise them to 50%. Eugenio Grandio, president of the Electric Mobility Association in Mexico, called it a “game-changer.” The proposal still awaits approval from Mexico’s Congress, but Morena’s majority makes passage likely.

While the tariff is broad, legacy U.S. automakers are protected by a 2003 decree allowing them to import a percentage of vehicles tariff-free thanks to their production plants in Mexico. Tesla and BYD, lacking factories in the country, would be hit hardest. Tesla suspended plans for a massive plant in northern Mexico in 2024, while BYD abandoned its factory project due to political and trade concerns.

Tesla currently imports all its Model 3 and Model Y cars for Mexico from its Shanghai plant, though it may rely on stockpiles and other global factories to soften the impact. BYD, despite scrapping its plant, sold 40,000 cars in Mexico in 2024—nearly half of all EVs sold—and doubled its sales pace in 2025. However, higher tariffs could threaten its competitive pricing, built on Chinese subsidies and low labor costs.

China urged Mexico to reconsider, warning of damage to bilateral trade, while U.S. industry groups welcomed the move, saying it boosts North American automakers’ ability to compete.