In recent years, the automotive industry has grown to be one of the economy’s industrial manufacturing pillars, currently representing approximately 3 per cent of Mexico’s gross domestic product and 18 per cent of the national manufacturing GDP, standing as the second most important manufacturing activity after the food industry. It creates more than 900,000 direct jobs and is one of the main sources of foreign investment with over US$52 billion invested each year.
The automotive industry in Mexico has been growing at a fast pace. Among the advantages that Mexico offers to original equipment manufacturers (OEMs), as well as to tier 1 and tier 2 companies, are a skilled workforce, a privileged geographical location and, thanks to the number of international treaties signed, the ability for those companies to have excellent access to multiple international markets (over 45 countries and counting).
To better understand the Mexican market and the current situation in the industry, we should highlight that production is generally divided into three main categories: light vehicles, heavy vehicles and auto parts. The figures for those sectors show that in 2018 around 3,908,000 light vehicles (a 0.6 per cent decrease compared with 2017) and 129,795 heavy vehicles were produced (a 15 per cent increase compared to 2017); the auto parts sector increased 7 per cent compared to 2017, resulting in Mexico being the fifth-largest auto parts producer in the world and the largest in Latin America, while climbing one position to become the sixth largest vehicle manufacturer globally.
The National Auto Parts Industry has forecast that production of Mexican auto parts will continue to grow in the coming years, with an expected US$96 billion value by 2021.
Currently Mexico has over 20 assembly plants (with further plants being planned for construction) and a powerful tier 1 supplier network with over 600 suppliers countrywide (at least 95 per cent of all tier 1 companies are present in Mexico). In 2017, the states of Sonora, Coahuila, Puebla, Mexico, Guanajuato, Nuevo León and Aguascalientes generated 84.2 per cent of the total vehicle production.
Regarding exports, Mexico ranks as the fourth-largest exporter in this industry; during 2018 Mexico exports were worth US$49.4 billion, a solid 19 per cent increase on exports when compared with 2017, and the highest figured ever reported by the industry. Mexico currently exports over 88 per cent of its total vehicle production, accounting for US$1 out every US$3 received by the country from exports.
There are many destinations for Mexican exports, the main one being the United States, which counts Mexico as its main automobile supplier, receiving around 74.4 per cent of its vehicle production, Canada receiving 7.2 per cent, Germany 4.4 per cent, Brazil 2.3 per cent and Colombia 1.5 per cent. Nevertheless, exports to other destinations have also risen. For example, in the past few years China became Mexico’s sixth most important destination, exports to Argentina grew by 53.2 per cent, and to Chile by 41 per cent.
As a result of investments and the establishment of new local plants, Mexico currently ranks as the world’s sixth-largest vehicle producer and the fourth-largest exporter. Many predict that by 2020 (with the arrival of Mazda, Audi and BMW, and expected investment from Chinese companies such as BAIC and JAC) the industry may reach the production of 5 million light vehicles in more than 30 plants. It is also worth mentioning that even though recent plant cancellations (such as the Ford plant in San Luis Potosi), and a light vehicle sales decrease, foreign investors find Mexico as a suitable option: Gestamp, the Spanish automotive supplier, has recently inaugurated its new factory in San Luis Potosi, and Ford has decided to shift by 2020 its Transit Connect van production from Spain to Mexico.
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