For years the worry about Mexico’s industry was that it wouldn’t be able to withstand pressure from China – that companies would leave Mexico for lower costs in China. It turns out the battleground may also be in Mexico.     China’a largest automobile manufacturer has formed a joint venture to manufacture and sell cars in Mexico.

      First Automotive Works Group (FAW) and Grupo Elektra S.A. de C.V., Latin America’s leading specialty retailer, consumer finance and banking services company, will introduce FAW automobiles into the Mexican market — with state of the art technology, and top safety and emission control standards — oriented to new customers in the marketplace in the first quarter of 2008.

      Grupo Elektra completed a strategic alliance with FAW Group — the largest automobile group in China, and partner of Volkswagen/Audi, Toyota and Mazda — which allows Grupo Elektra to sell cars in Mexico that are produced in China. As part of the alliance, within the next three years, Grupo Elektra and FAW Group will build an assembly plant in Michoacán, with important geographical and logistic advantages, to produce cars in Mexico in 2010, with which it will supply the Mexican and Central American demand. A groundbreaking ceremony was held on site in November. Attendees included Mexico President Felipe Calderón; Grupo Salinas president Ricardo B. Salinas; FAW Group Corporation president Zhu Yanfeng; and Tianjin FAW Xiali Automobile Division General Manager Wang Gang.

      The investment to build the plant and purchase equipment will be approximately $150 million over the three-year period, and the plant will have the capacity to assemble 100,000 vehicles annually. After the three years, the company will analyze the possibility of increasing the production capacity. After the production facility is put into operation the joint venture will produce economy cars named Xiali and Vita, which will be sold to the Mexican market.

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