Chinese automaker BYD Company Ltd plans to build an electric vehicle (EV) plant in Mexico, according to reports citing the head of the company’s local sales subsidiary.

BYD entered the Mexican market at the end of 2022 with a target to sell around 10,000 vehicles, including the Han and Tang EVs, through several local distributors.

China’s largest EV manufacturer reported just over 3 million global sales last year, including 1,575,000 battery electric vehicles (BEVs) and 1,465,000 hybrids. Overseas sales surged more than fourfold to 242,765 units, as the company stepped up its global expansion to challenge Tesla position as the world’s largest BEV company.

A plant in Mexico would look to supply vehicles locally and to other markets in the region, including the US. According to reports, a feasibility study for the plant is already underway and discussions are currently taking place with government officials over factory location, investment incentives and other benefits.

Mexico is one of the largest exporters of goods to the US, with numerous vehicle brands also making the most of low-cost production in the country to target the US market. BYD is also looking to tap into this opportunity.

The US auto industry, including Tesla, has warned of the adverse effects that the entry of cheap Chinese vehicles would have on the US automotive industry. Elon Musk warned that without trade barriers, Chinese automakers “would demolish” the local US auto industry.

BYD has already invested over US$600m in Latin America, in Brazil’s Bahia state, to produce vehicles in an industrial complex which until 2021 was occupied by US automaker Ford.