Ford Motor Company has cancelled plans to set up a new $1.6 billion plant in San Luis Potosi, Mexico, following US president-elect Donald Trump’s criticism of the company’s make-in-Mexico programme.

In early December 2016, Trump had threatened to impose a 35 percent tax on Ford cars manufactured in Mexico and then sold in the USA. Instead, Ford will now invest $700 million to expand its Flat Rock Assembly Plant in Michigan into a factory that will build high-tech autonomous and electric vehicles along with the Mustang and Lincoln Continental. The expansion will create 700 direct new jobs.

Announcing the cancellation of the Mexico plant, Ford detailed seven of the 13 new global electrified vehicles it plans to introduce in the next five years, including hybrid versions of the iconic F-150 pickup and Mustang in the US, a plug-in hybrid Transit Custom van in Europe and a fully electric SUV with an expected range of at least 300 miles for customers globally.

Donald Trump targets General Motors

A few hours before Ford Motor Company announced that it is cancelling plans to set up a $1.6 billion manufacturing plant in Mexico, USA president-elect Donald Trump sent out a tweet critical of General Motors’ manufacturing the Chevrolet Cruze hatchback in Mexico and threatened to impose a high border tax.

Trump’s post read: “General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border. Make in U.S.A. or pay big border tax!”

The carmaker soon responded with its own tweet and said the overseas plant was for the manufacturing of its Chevrolet Cruze hatchback and that all Cruze sedans sold in the US are made in US.

“General Motors manufactures the Chevrolet Cruze sedan in Lordstown, Ohio. All Chevrolet sedans sold in the U.S. are built in GM’s assembly plant in Lordstown, Ohio. GM builds the Chevrolet Cruze hatchback for global markets in Mexico, with a small number sold in the US.”

In 2014, GM had announced investment plans to the tune of US$ 3.6 billion in Mexico for manufacturing small cars. This investment was part of a $5 billion programme designed to double its production capacity as well as modernise manufacturing operations at its four plants in Mexico – in the states of San Luis Potosi, Guanajuato, Coahuila and Mexico State.

Mexico, in the recent past, has become an attractive investment destination for foreign automakers thanks to its labour costs, which are said to be a fifth of what they are in the US.

Since the beginning of 2010, automakers, including BMW, FCA, Ford, General Motors, Honda, Hyundai, Mazda, Nissan, and Volkswagen, have announced more than $24 billion in Mexican investments. Many of the announced investments were for expansion or retooling of existing facilities, but a large portion of this investment was announcing plans to build new factories by companies such as BMW, Ford, Honda, Hyundai, Mazda, Nissan, and Volkswagen/Audi.