One of Tesla's biggest rivals might be setting up shop in its backyard
The prominent EV automaker is looking into a strategic region for a stateside entry.
Affordable electric cars are coming, but recent developments suggest that they might not come affixed with a Tesla (TSLA) badge any time soon.
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According to a report by Nikkei, Chinese EV automaker BYD (BYDDY) is considering the idea of building a plant in Mexico. Its manager of Mexican operations Zhou Zou told the Japanese newspaper that the automaker is looking to establish an export hub to the United States.
The planned facility in Mexico is a part of a building surge at BYD, as it expands its global footprint in key world market hubs such as Thailand, as well as planned production hubs in Hungary and in Brazil, where it plans to spend north of $605 million on a plant in the Latin American country.
"Overseas production is indispensable for an international brand," Zou told Nikkei.
Zou said that the automaker has launched a feasibility study into a plant in Mexico and is currently in negotiations with national and local officials over potential locations and other terms regarding the plant. 
BYD did not explicitly say where the plant will be built, but potential candidates and options include the Bajio region in central Mexico, the Yucatan Peninsula, as well as Nuevo León in the north near the Texas border.
"Mexico is a key market with vast potential," Zou told Nikkei, expressing the company's eagerness to build a plant within the country.
Mexico is already a convenient place for both traditional and EV automakers to build, as the dominoes in play allow for an incredibly great strategy to build cars headed for the U.S. market.
Cars such as the Ford Mustang Mach-E to the BMW 3-series are built in Mexican factories for stateside drivers, taking advantage of the United States-Mexico-Canada Agreement, or the USMCA.
Under the agreement, automakers can import cars tax-free as long as 75% of its parts are built in North America – allowing manufacturers — including Detroit's Big Three, to increase profit margins by lowering their labor costs.
As the tariff on Chinese-made cars stands at a stiff 27.5%, there is a huge incentive for Mexican-made Chinese brand cars to come across the border.
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“The Chinese are looking at Mexico as the segue to enter the United States,” César Roy, an experienced Mexican automotive industry analyst told MotorTrend. “It’s a wise commercial plan because with the free trade agreement, they are betting that the North American market will open sooner or later.”
The potential BYD Mexico factory might put the company in the backyard of Tesla, which is planning on building its Gigafactory near Monterrey in the state of Nuevo León. On Dec. 14, the state approved more than $153 million in incentives for the factory.
During Tesla's Q4 earnings call on Jan. 24, Elon Musk noted that Chinese car companies "are the most competitive car companies in the world," and warned that they may be a problem if protective measures aren't in place.
"I think they will have significant success outside of China depending on what kind of tariffs or trade barriers are established," Musk said. "Frankly, I think if there are not trade barriers established, they will pretty much demolish most other companies in the world."
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