Advancing Mexico’s Automotive Industry Through Tech, Talent

Q: What benefits do advanced technologies bring to Mexico’s auto parts manufacturers?

A: Over 50% of the leading auto parts manufacturers in Mexico have already integrated advanced technologies, including robotics and AI, into their manufacturing processes. This has enabled the industry to increase sales at a rate of over 10% annually. About 20% of the auto parts produced in Mexico are related to electronic and electrical components. Technologies such as robotics, automation, and AI have been key in the implementation of lean manufacturing processes, which reduce operational costs while improving productivity.

Thanks to this technological integration, we have strengthened our participation in North American supply chains. For example, 53% of the parts and components in the United States and Canada originate from Mexico (43% of the United States’ auto parts imports and 10% of Canada’s).

Q: What obstacles do companies face when incorporating new technologies, and how has the association supported them throughout the process?

A: The first challenge is the limited availability of skilled talent. Adopting advanced technologies requires the development of specialized curricula and a stronger relationship between government, academia, and industry under the triple helix model. In the past 10 years, Mexico has improved its academic curricula, but it is necessary to intensify collaboration between universities and the industry to ensure that the available talent can meet the growing needs of the sector.

The second major challenge is the limited infrastructure, particularly in the energy sector. The auto parts industry requires a reliable power supply to meet the demands of both new investments and existing operations. Power supply interruptions affect synchronization with international customers. It is thus necessary to work on solutions to ensure operational continuity. We are pleased that President Claudia Sheinbaum's administration has outlined an energy policy focused on electromobility, which opens up opportunities for the prioritization of investments in energy infrastructure and telecommunications. With these efforts, we can continue to attract investments to the automotive and auto parts sector. Future prospects, supported by nearshoring and the growing demand for technology in manufacturing, are promising.

Q: How is the revision of the USMCA expected to influence the auto parts and automotive industry? 

A: The automotive and auto parts industry is one of the most integrated in North America, which makes it less vulnerable to potential changes. But a revision of the USMCA presents both challenges and opportunities. Priorities include analyzing and adjusting the Rules of Origin, especially to incorporate electronic, electrical, semiconductor, hardware, and software components. These elements are key to updating regulations and deepening supply chain integration in the region. New topics such as market trends, electromobility, labor issues, and environmental concerns are expected to be included. 

It is essential to maintain a regional focus, prioritizing commercial integration in North America rather than bilateral agendas. INA has actively engaged in meetings with its counterparts in the United States and Canada to drive collaboration. For example, we recently participated in the MEMA Annual Conference in Detroit to define a common agenda with our North American partners. Fortunately, the Mexican private sector has accumulated significant expertise in international negotiations since the creation of NAFTA. Trade experts are collaborating with the Ministry of Economy to establish a task force representing the industry.  

We see significant opportunities with the arrival of Asian investments, including Chinese companies. Although these investments must comply with the USMCA Rules of Origin, they present an opportunity to strengthen regional manufacturing and create jobs in Mexico, the United States, and Canada. The industry is prepared to collaborate with the Mexican government on this review, consolidating a tripartite vision with our trade partners to ensure a competitive future aligned with technological and market trends.

Q: What opportunities are expected to arise during President Claudia Sheinbaum's administration?

A: We have identified an opportunity to strengthen the dialogue between the public and private sectors, particularly through the Ministry of Economy, which will be key in developing public policies for the automotive and auto parts industry. The first quarter of 2025 will be crucial for establishing dialogue tables, which will define the strategies needed to address technological trends and global changes toward 2030-2050. It is essential for Mexico to consolidate its role in the transition to advanced technologies and electromobility, but this process requires supportive public policies that encourage growth and ensure the continuity of current investments.

Over 60% of INA’s board members have mentioned they are interested in increasing their investments in Mexico, not only to expand manufacturing capacities but also to establish engineering, innovation, and development centers. These investments reflect a commitment to developing new products and advanced technological processes in the country, which will foster greater integration between industry and academia in talent development. In the next five to ten years, we will see significant growth in R&D, making it essential to have a solid public policy agenda that promotes collaboration and ensures the success of Mexico’s automotive sector.

Q: What advances has the industry made in the production of components for electric and hybrid vehicles?

A: Mexico has made significant advances in the production of key components for electric and hybrid vehicles, such as batteries, harnesses, and electronic control systems, which represent 35% of the sector's exports. However, it is necessary to improve infrastructure and develop local suppliers that meet the certifications required by Tier 1 companies and automakers. These advances could increase annual exports of electrical parts and components by up to 15%.

By 2050, it is estimated that electric components will represent 50%-60% of the sector’s exports, reflecting the market transformation and Mexico's adaptation to this new technological reality. This shift not only involves adjustments in manufacturing but also a cultural transition in driving experiences and responsible consumption. The automotive and auto parts industry is on track to become Mexico's first green industry thanks to its focus on electromobility and advanced technologies. This will be a key moment for positioning the country as a leader in this global transformation.

Q: What opportunities is nearshoring bringing to Mexico’s auto parts sector?

A: In the first half of 2024, nearshoring drove a 15.09% increase in foreign direct investment (FDI) in the auto parts sector. The year is expected to close with a 20% growth in FDI. This phenomenon has strengthened Mexico as a manufacturing hub in North America, and allowed for its growth in the Latin American and EU markets. Companies from many countries like Japan, South Korea, and Germany have shown interest in establishing more operations in Mexico, not only to supply the North American region but also as a platform for marketing to other markets. The possible signature to the modernization of the trade agreement with the European Union could also offer significant advantages, such as the removal of 10% tariffs on automotive products, which would further incentivize investment.

The year has also seen significant growth in the development of local suppliers, and a growing number of companies have expressed interest in collaborating with INA. Mexico maintains a strategic position within a global supply chain involving more than 40 countries. By 2025, nearshoring is expected to continue driving investment, but it will be crucial to align public policies, establish appropriate incentives, and strengthen local capabilities to maximize these opportunities and solidify Mexico's position as a leader in the auto parts industry.

Q: What are your goals for 2025 as the new head of INA?

A: We will work to consolidate Mexico as a global leader in auto parts production. The country is now the fourth in the world in the industry, and our goal is to enter the top three. This will involve achieving greater integration within the North American region, which receives over 60% of Mexican auto parts exports. By fostering synergies within North America, we aim to help to ensure that the automotive industry positions itself as a leader.

Other challenges include improving infrastructure and designing incentives that accelerate the adoption of advanced technology in manufacturing processes. This also involves strengthening the electric charging network and expanding its coverage. 

Internally, INA will focus on strengthening commissions and committees to address newtopics such as the USMCA, 4.0 technologies, sustainability, foreign trade, and regulatory compliance. We also organize key automotive fairs, both for original equipment and aftermarket parts, which allows us to stay at the forefront of technological trends and challenges. The next edition of INA’s International Congress of the Mexican Automotive Industry (CIIAM) will be a key event where technological trends and priority issues for the industry will be discussed. In 2025, INA will also focus on preparing an exhaustive technical analysis to address the challenges the automotive industry in Mexico faces.