News Article

Automotive Industry Drives Mexico’s Economic Growth

Tue, 09/30/2014 - 16:10

After warmly congratulating the MAR team and officially receiving the Mexico Automotive Review 2015, Eduardo Solís focused his opening address on the automotive industry’s continuing importance to the Mexican economy. Impacting 20 subsectors directly, it contributes to 19.8 of the manufacturing GDP. For Solís, this proved beyond a shadow of a doubt that the automotive industry has moved beyond its maquiladora roots. “It is now is an integrated industry with a high added value that is no longer concentrated in the border states, as the Bajio region has experienced the largest growth in recent years,” said the AMIA Executive President.

The automotive sector also comprised 20.8% of FDI in 2012, which helped Mexico achieve historic levels of exports and become the 7th largest vehicle manufacturer worldwide and the first in Latin America. With more than 80% of Mexican automotive production going to foreign markets, the heaviest beneficiary is the US, which recently saw Mexico leapfrog Japan as its second-largest exporter.
While OEMs have been dominating news about the Mexican automotive sector, suppliers are not to be overlooked, said Solís. Despite ongoing sophistication, the Tier 2 supply chain in Mexico is concentrated in but a few commodities, such as smelting and plastic injection. 71% of total demand for processes is still imported, making this level of the supply chain the greatest automotive opportunity that Mexico has yet to take advantage of.

Solís warned about judging Mexico’s automotive success by its export levels alone. He mentioned that the sector has still not been able to recover from the 2009 crisis, when it dropped 30%. “The amount of sales has remained stagnant for the last ten years, and we are not achieving a renovation of the vehicle pool. 640,000 used cars entered Mexico from the US last year, ultimately damaging the market,” stated Solís. A new decree is trying to address the importation of cars that do not meet environmental criteria, but amparos issued by two judges have blocked this progress, allowing up to 90% of the used cars to come through, according to Solís. The Executive President of AMIA praised the decree and thundered against corrupt public servants that acted with impunity in granting the amparos. He urged that Mexico follow the example of Brazil and Argentina that have healthy second-hand vehicles markets because they do not allow the entrance of illegal used vehicles. Ultimately, he warned, Mexico cannot solely depend on exports and it needs a strong internal market. This is where the industry’s challenges lie and where AMIA is working with the federal government: to continue opening merkets.