Mexico's Economy Minister Ildefonso Guajardo holds a model of a car during a news conference to announce the new plant of JAC Motors in Mexico City. [Photo/Agencies]

Chinese firm sets sights on Central, South America

China's Anhui Jianghuai Automobile Co Ltd is teaming up with Mexican company Giant Motors Latinoamerica to localize its sport utility vehicles, but analysts doubt the wisdom of a move which will target customers in Mexico, and Central and South America.

Hidalgo State Governor Omar Fayad announced the cooperation at a news conference on Wednesday, saying that the two companies will invest a total of $212 million to expand the capacity of a plant owned by Giant Motors in Ciudad Sahagun, Hidalgo, AFP reported.

A JAC spokesperson told China Daily that it is currently strengthening technological cooperation with Giant Motors but did not confirm the investment.

AFP quoted Giant Motors head Elias Massri as saying that it will start producing SUVs at the plant within two months, with 1,000 vehicles in the first year and the goal of making 10,000 per year by 2021.

JAC sold 367,300 passenger vehicles in 2016, a year-on-year increase of 6.09 percent, and 27,500 of them were SUVs.

But some analysts said it may not be wise to make big investments in the country if JAC aims to sell its cars in Central and South America.

John Zeng, managing director of LMC Automotive Consulting Shanghai, said it would be baffling if JAC did make such an investment.

He said that it is cheaper to export cars to those countries from Mexico than from China but JAC could have built a plant somewhere in the South American countries.

Yale Zhang, managing director of consulting firm Automotive Foresight, said several other Chinese automakers had contemplated building plants in Mexico, but all of them saw it as a natural gateway to the United States and Canada.

In 2016, 17.59 million cars were sold in the US and almost 2 million cars in Canada, much larger than Central and South American markets combined.

He said Chinese carmakers may find it even harder, if not impossible, to fulfill their goals now that US President Donald Trump has threatened to renegotiate the North American Free Trade Agreement, which includes the US, Mexico and Canada.

Mexico is the world's fourth-biggest car exporter. It produced 3.46 million cars in 2016. Of them, 2.77 million cars were exported, with three quarters of them to the US, according to local industry association AMIA.