By Joel D. Joseph, Chairman, Made in the USA Foundation
The Ford Mustang is an American icon, introduced at the New York World's Fair on April 17, 1964. Designed by Gale Halderman, the Mustang is a significant American success story. Lee Iacocca was the Ford executive who pushed development of the Mustang. One million Mustangs were sold during the first two years of production. Ten million Mustangs were sold by 2018. For sixty years the Mustang gasoline powered muscle car has been produced in the United States.
However, the Mustang nameplate now also calls China and Mexico home. Ford started production the Mustang Mach-E, an electric vehicle, at a plant in Chongqing, China, with the first completed example of the battery-electric crossover rolling off the line in October, 2021. Ford sold 7,782 Mustang Mach-E models in China last year, compared to nearly 40,000 in the U.S. The U.S.-bound Mustangs were made in Mexico with a majority of its content imported from China.
The Chinese Ford plant supplies the Ford Mexico plant with most of the parts that go into the Mustang Mach-E including its expensive battery. The Mustang's transmission is imported from Japan.
Congress, in its infinite wisdom, provides for a $7,500 tax credit to lease a $60,000 Mustang Mach-E that is Made in Mexico with 51% Chinese parts, 18% Mexican parts and 26% U.S./Canadian content. This is part of the Inflation Reduction Act that was supposed to encourage electric vehicle production in the United States. We are subsidizing a car that is at most one-fourth American! How does that help the U.S. economy?
The U.S. federal tax credit for electric vehicles (EVs) applies to vehicles that are assembled in North America, which includes Mexico. Even the Chinese-Mexican Ford Mustang Mach E qualifies for $7,500 tax credit if it is leased.
94,436 Ford Mustang Mach-E EVs were produced in Mexico in 2023. Many were sold in Mexico with thousands shipped overseas.
Former U.S. president Donald Trump proposed the United States Mexico Canada Agreement in 2018, also known as NAFTA 2.0, to replace the North American Free Trade Agreement (NAFTA). NAFTA 2.0 mandated that cars made in Canada and Mexico be treated the same as cars made in the U.S.A. Big mistake. This law is the main reason that Congress passed subsidies for cars made in Canada and Mexico.
Former President Trump howled, "China now is building a couple of massive plants where they're going to build the cars in Mexico, and they think they're going to sell those cars into the United States." However, Trump is directly to blame for cars being built in Mexico because he pushed NAFTA 2.0 into effect.
Transportation Secretary Pete Buttigieg ordered a Mexican-built Mustang Mach E for his use at his government agency. Apparently Buttigieg didn't realize that Mustang does not qualify under the Buy American Act making his purchase illegal.
Ford Should Be Ashamed
Ford survived the great recession of 2008-2009 without being bailed out. Ford has always been a great "Made in the USA" company until recently. The company should source batteries in the United States and manufacture expensive cars and trucks like the Mustang Mach E in the United States. It manufacturing the electric Ford F-150 Lightning in America and should do the same and the Mustang.
Congress Should Act
Because NAFTA 2.0, formally called the U.S. Canada Mexico Free Trade Agreement, was not passed as a treaty, it can and should be repealed by Congress. The United States should not be subsidizing its own demise by encouraging automakers to produce cars in Mexico and Canada rather than the United States.
