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Default China's ZX Auto Reveals Latest Mexico Production Plans

China's ZX Auto Reveals Latest Mexico Production Plans
Dec 17, 2009

TIJUANA, Mexico — ZX Auto (Hebei Zhongxing) of China has signed a deal to manufacture cars or light buses in the Mexican state of Baja California. The arrangement was signed in China last month between ZX Auto and the governor of the Mexican state. It is the latest in a string of attempts by this and other Chinese automakers to get production going in Mexico.

In 2006 ZX Auto had plans to build a facility in Tijuana to produce SUVs and pickups, which would have made it the first Chinese company to set up operations in Mexico. The next year, the company moved the plant's prospective location to Saltillo in northeast Mexico, incorporated a new U.S. company named CHAMCO (China America Cooperative Automotive) and sold dealership rights throughout Mexico. The whole plan was eventually canceled after fraud allegations against the leadership of CHAMCO came to light, harming the Chinese manufacturer's momentum in Mexico.
Earlier this month, Baja California Governor José Guadalupe Osuna Millan disclosed ZX Auto's investment plans, which are projected to amount to some $400 million and employ 1,400 people. Annual production volume is said to be near 200,000 units. ZX Auto would partner with Mexican Grupo FEMA, a local chain of Ford dealerships and a real estate developer.

The projections are highly optimistic considering that ZX Auto sold only 6,000 vehicles last year in its considerably larger home market of China. At least for the first few years, exporting the Mexico-built autos to the U.S. won't be an option because of the need to meet regulations first. But the plant's location close to the U.S.-Mexico border clearly sets the longer-term priorities of the company.

The models to be produced have not been announced, although the information at the news conference that buses would be manufactured seems unlikely. It would make more sense for ZX Auto to bring over models that the company currently sells in China and South America, such as the Landmark SUV, the Admiral pickup, and perhaps the Cruiser CUV.

Baja California is also the place where Toyota produces its Tacoma truck. The Japanese company's supply network in the area would be critical for this project. Fiscal incentives from the Mexican government and the attractiveness of Mexico's trade agreements are also encouraging the Chinese automaker to commit resources to this area.

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