The China EV Land Grab: BYD & Geely Eye Nissan-Mercedes Mexico Plant Amid Tariff Woes

Is the US Tariff Strategy Backfiring? Chinese EV Giants See an Opening in Mexico

How much pain must established automakers endure before strategic assets fall into new hands? For Japan’s legacy auto industry, the answer appears to be a crushing $13.7 billion loss in expected profit, largely attributed to aggressive U.S. tariffs imposed under the Trump administration. This massive financial shockwave is creating a golden opportunity for China’s electric vehicle (EV) titans, most notably BYD sales record surging into the Western Hemisphere’s backyard.

The latest intel suggests that Chinese EV leaders BYD and Geely are among the final bidders vying to acquire a crucial, existing automotive manufacturing plant in Aguascalientes, Mexico, formerly a joint venture between Nissan and Mercedes-Benz. This isn’t just about acquiring capacity; it’s about **BYD sales record** bypassing years of regulatory friction that has stalled their greenfield construction plans in the region.

The Tariff Tax: Devastating Japanese Automakers

The source data reveals the severity of the trade climate. For Japanese giants, U.S. tariffs between April and December 2025 annihilated an estimated 2.1 trillion yen (or $13.7 billion) from the collective operating profit of seven major automakers. This figure is almost one-third of their potential profit, forcing painful adjustments across the board.

• Nissan’s Turnaround: While the tariffs bite, Nissan is showing some progress in its restructuring. The company has significantly narrowed its full-year operating loss forecast from 275 billion yen to just 60 billion yen ($494 million), suggesting internal cost-cutting is starting to offset external pressures.
• Wider Pain: Other Japanese players feel the squeeze too. Honda, for example, saw a 42% drop in profit for the nine months ending December due to these same tariffs. Even with a revised forecast, Nissan still anticipates a substantial net loss of 650 billion yen for the year.
• Strategic Retreat: This financial pressure is clearly forcing legacy OEMs to shed non-core or less efficient assets, evidenced by Nissan and Mercedes-Benz closing the Aguascalientes plant.

Why the Mexican Factory is the Ultimate Prize for Chinese EV Makers

For BYD and Geely, securing the Nissan-Mercedes COMPAS plant is a strategic masterstroke. It offers an immediate, turn-key manufacturing footprint in North America with an annual capacity of 230,000 vehicles. This is a direct line to serving regional markets and potentially circumventing the political and regulatory hurdles Chinese firms face when attempting ‘greenfield’ projects.

The COMPETITION:

• BYD & Geely: The Chinese giants are frontrunners, signaling their commitment to local production over pure export dependency.
• VinFast: The Vietnamese EV maker is the only non-Chinese contender in the final shortlist, demonstrating a broader Asian push for regional assembly.
• Ousted Bidders: Other major Chinese players, like Chery and Great Wall Motor, were also interested but did not make the final cut.

The Geopolitical Tightrope Walk

While the federal government in Mexico cannot legally block the sale, there are reports that officials have privately encouraged state authorities to delay approvals for Chinese investments amid ongoing USMCA trade negotiations with the U.S. This highlights the intense geopolitical maneuvering occurring as Chinese manufacturing power seeks a North American base.

The U.S. government’s stance remains focused on curbing ‘subsidized Chinese overcapacity.’ Yet, a successful acquisition by BYD or Geely of an *existing* asset might be politically harder to challenge than a brand-new factory build, making this bidding war a critical flashpoint for the future of the North American auto supply chain. (See our analysis on China’s role in the Mexican auto supply chain for deeper context.)

Other Global Auto News of Note

Beyond the high-stakes Mexican acquisition, the global market is showing mixed signals:

• Mercedes-Benz Recall: Mercedes-Benz is recalling over 11,000 EQB models in the US due to a high-voltage battery fire risk.
• BMW Recall: BMW is executing a global recall affecting hundreds of thousands of vehicles over potential ignition switch safety hazards.
• Stellantis Warning: Stellantis issued a ‘Do Not Drive’ warning for 225,000 US vehicles still carrying high-risk Takata airbags.
• Vietnam’s Growth: Vietnam saw a massive 90% year-over-year jump in new vehicle sales for January 2026, signaling emerging market dynamism, though key brands were not included in that count.

Analyst Takeaway for Western Investors

This news confirms a central thesis: U.S. trade policy is successfully creating severe pain for Japanese OEMs operating under legacy structures, while simultaneously accelerating the strategic, asset-light expansion of aggressive Chinese EV manufacturers like BYD. If a Chinese firm wins the bid, it instantly gains a U.S.-adjacent manufacturing base, shifting the competitive dynamic in the Western Hemisphere much faster than expected. Investors tracking the EV transition must monitor this acquisition closely.

Recommended Reading

For a deeper dive into the competitive landscape that shapes these global maneuvers, consider reading The Chip War: The Fight for the World’s Most Critical Technology by Chris Miller, as understanding technological supply chain dominance is key to deciphering modern auto industry strategy.