- 5/10/2025
NEW CAR REVIEW
Category
🚗
MotorTranscript
00:00Depending on when you're seeing this, tariffs are, or have already, or maybe will be, or maybe won't be in place on our North American neighbors, Mexico and Canada.
00:10The idea is that tariffs would make the production and import of goods from those countries more expensive, forcing companies to move production to the U.S.
00:18Local jobs, local spending, good for the economy, right?
00:21But I'm not sure everyone realizes just how many pieces of the U.S. auto market come from Mexico.
00:28Ford, Chevy, GMC, Jeep, Dodge, Ram, and Chrysler all make vehicles in Mexico.
00:34And it's not just those U.S. automakers.
00:36Toyota, Honda, Mercedes, Volkswagen, Nissan, Mazda, Kia, Audi, and BMW all make cars in Mexico, too.
00:43And a lot of them specifically for the U.S. markets.
00:46So let's look at exactly who makes what where and what's most likely to happen if they can't make those there anymore.
00:54We'll start by looking at Stellantis as a prime example of this.
01:00100% of the Ram heavy-duty lineup of pickup trucks is built in Mexico.
01:05The 2500 all the way up to the 5500, along with other big truck products, are built at the Saltillo truck assembly plants.
01:11The straight-six diesel engines are built by Cummins in Indiana, but the 6.4-liter gas V8s, well, those are built in Mexico as well.
01:18Same with the 5.7-liter V8 that's under the hood of the Durango, and whatever else Stellantis is going to stick it in now that its V8-hating CEO was given the boot.
01:27So, too, is the much-hyped 3-liter twin-turbo Hurricane straight-six engine that's found in the Jeep Grand Wagoneer, the new Dodge Charger, Ram trucks, and the Ram Promaster vans.
01:37In fact, the whole Promaster line is built at Saltillo van assembly, right next door to the engine plant.
01:43And while those vehicles themselves are assembled in the U.S., we'll see if they can dodge tariffs on importing their engines.
01:50God, why did we do that?
01:52Stellantis also makes the 3.6-liter Pentastar V6, that legendary lump in Mexico at the Saltillo South engine plant.
01:59The 3.6 powers the Grand Cherokee, the Jeep Gladiator, the Chrysler Pacifica Hybrid, and that classic icon of American off-road culture, the Wrangler.
02:08Outside of the Saltillo area, Jeep also makes the Compass at its assembly plant in Toluca, Mexico, as well as the Electric Wagoneer S.
02:16That is a lot of cross-border production.
02:19So how did we end up here?
02:21Well, the way the U.S. automotive industry currently operates is based on years and years of free trade with Mexico and Canada.
02:28According to the State Department, trade between Canada and the U.S. totaled $762 billion in 2024.
02:36That's almost $200 billion more than trade between the U.S. and China.
02:41But trade with Mexico is even bigger.
02:45$839 billion worth of trade in 2024.
02:49This all really traces back to when America and our neighbors to the North and South got together in the early 1990s
02:55and formed the North American Free Trade Agreement, or NAFTA.
02:58NAFTA essentially turned the three countries into one as far as manufacturing was concerned.
03:03A company could build something in Canada and export it to Mexico without a tariff.
03:08I'm not going to get into whether it was good or bad.
03:10It was both, by the way.
03:11But it changed the economies of all three countries forever.
03:15In particular, it sparked a massive expansion of car manufacturing in Mexico
03:19because American automakers quickly realized they could set up factories south of the border,
03:24pay workers a lot less, and ship the cars back north as easily as if they were rolling out of Detroit.
03:29As long as 62.5% of a car's components came from the U.S., Mexico, or Canada, they were golden.
03:36And it wasn't just American automakers.
03:38The Germans, the Japanese, the Koreans, almost every major company started building up in Mexico
03:44for cheap access to the American market.
03:46And in recent years, it's been the Chinese EV companies trying to gain a foothold.
03:50So in 2020, the first Trump administration replaced NAFTA with the new U.S.-Mexico-Canada agreement, or USMCA.
03:58This time, 75% of a car's parts needed to be from the three countries to qualify for a tariff waiver.
04:05All right, back to the list with a big one, General Motors.
04:08For starters, the Chevy Silverado and GMC Sierra pickups are both made at General Motors' Salau plant in Mexico,
04:15in addition to three factories in the U.S.
04:17And not just a few of them.
04:18In 2024, over 360,000 units of those two trucks were made in Mexico and shipped to the United States.
04:26Now, GM has said they could ship some production to their Fort Wayne plant in Indiana to avoid those tariffs,
04:32but that can't happen overnight.
04:34Also built in Mexico are the Equinox SUV, as well as the upscale GMC version, the Terrain.
04:39And so is the Equinox EV, the Blazer EV, and the standard Blazer.
04:44There's a number of Cadillacs that have been built in Mexico in the past,
04:48and the new Optic EV will be the latest one.
04:51No surprise here, since it shares a platform with those other GM EVs.
04:55And while the CT5 sedan isn't assembled south of the border, nearly half of its parts come from Mexico.
05:01In 2022, Ford received a ton of praise for the Maverick being a cheap, entry-level trucklet
05:07that gave people as much hauling capability as they actually needed.
05:11With a launch MSRP of less than $20,000, it almost single-handedly revived the U.S. compact pickup market.
05:20So, the Bronco Sport and the Maverick are built at Ford's Hermosillo plant,
05:24and a 25% increase in costs would make the Maverick more expensive than its nearest competitor,
05:29the Hyundai Santa Cruz, which is built in Alabama.
05:32The Mustang Mach-E, Ford's all-electric SUV, also a relatively affordable option from the automaker,
05:38well, it's built at the Qualtilon Assembly plant in Mexico.
05:41Late last year, Ford announced plans to invest nearly $300 million in its Irapuato plant in the country,
05:48where they plan on building the power unit for the Mach-E.
05:51Those plans could change.
05:52Now is probably a good time to talk about the estimated cost of moving vehicle production
05:58from Mexico to the United States.
06:00With these tariffs, there are a lot of ways an automaker could respond.
06:04They could straight-up pay the tariff and eat their losses.
06:06They could pay it and pass the cost along to buyers like you and me.
06:10Or they could attempt to wait out the tariffs,
06:13place a hold on cars made in the affected countries,
06:16and see what happens in four years.
06:17That's a long time to wait on something already in production,
06:21but it might be cheaper than paying tariffs.
06:23Maybe they could move production to a factory in the United States.
06:26After all, that's the whole point of this, right?
06:28Moving production to a new factory altogether would take a significant amount of time, however,
06:33and while building a new factory,
06:35the automaker would still be charging a premium for their cars.
06:38It's also worth noting that the labor to build a vehicle in Mexico
06:41can cost as much as 90% less than building a car in the U.S.
06:46So an automaker might do the math and decide it's worth their time and money
06:49to just keep building in Mexico rather than move production to the U.S.
06:53Whatever decision automakers go with,
06:56estimates are that the immediate cost would be somewhere between $6,000 and $12,000 per car
07:02to pay for the tariffs.
07:04And that's every car.
07:05Because whether automakers decide to pay the tariffs or move manufacturing to the U.S.,
07:10they're still likely to amortize the cost of that decision across their entire lineup.
07:15So you probably won't see a $20,000 increase on an $80,000 vehicle
07:20if that's the only thing an automaker makes in Mexico.
07:22They just spread out the cost increase to soften the blow.
07:25Speaking of softening the blow, I need some coffee.
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08:39All right, let's get back to the list.
08:43We gotta speed this up.
08:44Audi makes the Q5 their mid-size SUV in San Jose, Chiapas, Mexico.
08:49The long-wheelbase Q5L isn't made in Mexico, so maybe it'll be easier to just get...
08:54Oh, wait, it's made in China.
08:56Never mind.
08:57It's worth mentioning that some people assume that manufacturing in Mexico is of lower quality.
09:02And if your understanding of Mexico comes from watching Narcos, I could see how you got there.
09:06But BMW doesn't agree with you.
09:08The M2, the M2, is built exclusively in Mexico, not Germany.
09:13And whatever you think of the styling, it's still a pretty high-quality machine.
09:17BMW's San Luis Potosi plant makes the M2 along with the 2-series coupe and the 3-series sedan to ship all over the world.
09:24And it wouldn't be out of the realm of possibility for them to just drop a couple of those models from the U.S. for a while.
09:29At the Honda de Mexico Salaya plant, they make the HR-V as well as their CVT transmissions.
09:35That same factory will soon start building the new Acura ADX compact crossover, which is intended to be the brand's entry-level model.
09:42And the Honda Prologue, which was co-developed with GM, is made on those same Mexican assembly lines as the GM EVs I mentioned earlier.
09:49Moving existing production lines from Mexico to the U.S. would be extremely complex, but it's a lot simpler if things are still in the planning stages.
09:57Like the Civic Hybrid, which Honda launched last year to great fanfare.
10:01We named it our car of the year.
10:02Honda was planning to build it in Mexico to keep the car affordable, but earlier this month, Reuters reported that the automaker had decided to move production to its Indiana plant to get ahead of any tariffs.
10:13Mazda makes quite a few cars in Japan, but they also make a few in Mexico for the U.S. market.
10:18The Mazda 3, their compact Civic competitor, is built in Mexico, as is the CX-30.
10:23Kia only builds one car in Mexico, the K4.
10:26I still think that's a really dumb name.
10:28This one is small, economical, and its appeal mainly comes from its starting price.
10:33Which, you know, is true of all economy cars.
10:35You don't buy them because they're great.
10:37You buy them because they're great values.
10:38The K4 is relatively new, too, so this would be a big hit right out of the gates.
10:43But this isn't the first time the U.S. has been toying with 25% tariffs on the auto industry.
10:49In fact, the last time we did, the light truck market changed forever.
10:53Back in the 1960s, Europe put tariffs on imported chicken from the United States.
10:57Long story.
10:58To clap back, the U.S. put a 25% tariff on imported potato starch, brandy, and light pickup trucks.
11:05You know, the big three.
11:06That tariff still exists today.
11:09And it's why the American truck market is completely different from the rest of the world.
11:13We don't get cool things like the two-door compact pickup from Volkswagen or the legendary Toyota Hilux.
11:18And it's because of the chicken tax.
11:21Instead, we have, and are known for, the biggest trucks a driver can buy.
11:26In biology, there's a phenomena called island gigantism,
11:29where a species that is cut off from the mainland will just grow bigger and bigger due to a lack of predators.
11:34Sound familiar?
11:34Okay, the causes are different, and so is the outcome,
11:37but it's not every day I get to use my biology AA.
11:39Let me have this.
11:41Lots of automakers try to get around the chicken tax in various ways,
11:44but it shapes the face of the American auto industry,
11:47and there's no reason to believe new tariffs would be any less impactful.
11:51Speaking of things shaped by the chicken tax, let's talk Toyota.
11:54Ever seen a Toyota Tacoma with an American flag on it?
11:56Well, the appropriately nicknamed Taco is now made exclusively in Mexico at two separate plants,
12:02Baja California and Guanajuato.
12:04The Tacoma is sold in a few other countries, but it's mostly a U.S. truck.
12:08Places outside the Americas generally get the smaller and more durable Hilux.
12:13Toyota's most popular vehicle, and the best-selling non-pickup badge in the United States,
12:18the RAV4, is built in Canada.
12:21The regular versions, at least.
12:23The hybrid Prime model is built in Kentucky.
12:25But if tariffs hit and Toyota doesn't shuffle the deck,
12:28the RAV4 could suddenly cost the same as a Lexus.
12:31Except, Lexus builds both the RX and the NX in Canada, too,
12:35at the Cambridge, Ontario plants.
12:37All right, back to Mexico again.
12:39Another German automaker makes the list.
12:41Mercedes.
12:42They make plenty of their cars in Germany and elsewhere around the world, of course,
12:45but the GLB SUV is made in Mexico.
12:48So, that cheap Nissan Versa you benign for your teenager when they reach driving age?
12:52It's built in Mexico.
12:53The Sentra is, too.
12:54A compact sedan that's priced just a bit above the Versa.
12:57The small Nissan Kicks?
12:59Also built at the same Aguascalientes plant as the Sentra and the Versa.
13:03Nissan doesn't save its luxury models for other countries, either.
13:05The Infiniti QX50 SUV is built in Mexico, as is the QX55,
13:11though both are supposed to end production later this year.
13:13While it's possible that you're like me and fondly remember the Das Auto ads from the folks over at VW,
13:19it might be better to think of it as El Auto when it comes to these models.
13:23Volkswagen makes their Jetta at their plant in Puebla, along with the Tiguan and the Taos.
13:28Tesla.
13:29Tesla.
13:30Was planning on building a Gigafactory in Mexico.
13:32Mexican officials have said that Tesla got $135 million in incentives to build the plant there.
13:39But for some reason, those plans have stalled.
13:42Oh yeah, that's right.
13:44Elon said uncertainty around tariffs meant it was impractical to build a plant there.
13:49Huh.
13:50If you thought car manufacturing was a, the company is based here, so that's where they make cars kind of operation,
13:58it's clearly worth revisiting that assumption.
14:00Pretty much every major automaker has a presence in multiple countries around the world,
14:05and a large number of them make at least one vehicle in Mexico.
14:08When you add up all the units built in Mexico and shipped to the United States in 2024 alone,
14:14it's over 2.7 million cars.
14:18That is about 17% of all new cars and trucks sold in the U.S. last year.
14:24The modern auto industry has formed around the idea of free trade.
14:28And whatever the reason for disrupting that,
14:30tariffs will dramatically affect the entire auto market in the United States,
14:34no matter who you buy your next car from.
14:36But right now, we honestly don't know how this is all going to shake out.
14:40We just know what hangs in the balance.
14:42That's it for me.
14:43Please like and subscribe if you enjoyed this video.
14:46Check out thedrive.com where we'll have the latest news on tariffs and manufacturing
14:49as this whole situation develops.
14:52And as always, I'll see you in two weeks with the next one.
14:54Thanks for watching.