José Rogelio Garza
Undersecretary of Economy, Industry and Commerce
View from the Top

Feeding Mexico a Strong Automotive Diet

Mon, 09/01/2014 - 16:08

Q: What is your vision to make Mexico an ideal investment destination for automotive companies?

A: The Ministry of Economy divides the automotive industry in two: the domestic market, in which we place the sales of heavy and light vehicles, and the global value chain of the automotive industry. Our domestic automotive industry is deeply intertwined in the global value chain and Mexico has to play a leading role in both of these areas. We have to see how we can attract more investment, we are evaluating where we are most effective and in which areas we can improve. One of the pillars that make Mexico an attractive destination is its FTAs and the access they offer to 45 other markets. This is a major plus as OEMs love being able to manufacture here and then export to as many countries as possible. Another important pillar is technology and we have increasingly invested in innovation and technology, making the automotive industry more robust. For example, we have promoted the creation of R&D centers for Tier 1 and 2 suppliers and companies like Bosch have answered that call.

The decision to invest in Mexico depends heavily on the capacity for exportation, and we like to stress that Mexico is one of the most open countries in the world for trade. Another important topic is the availability of capable engineers and technicians. Thirdly, there must be an availability of raw materials such as steel, gas and energy. We understand their importance and we have a clear political agenda for their importation. Steel is used in a wide range of industries including automotive, so we oversee the influx of steel to ensure its constant and efficient supply. Once companies gain more insight into Mexico, they are reassured by our structured policies and our level of human capital. Expectations have risen for the future of Mexico’s productivity and efficiency. The Energy Reform will transform the industry’s competitiveness, especially given how much energy the automotive industry consumes. To establish the level at which automotive investment is growing, the government usually receives ten prospective approaches per year by companies wanting to invest here. In 2013, this figure almost doubled.

Q: In what ways are you helping to increase local content in the Mexican automotive supply chain?

A: We have taken radical steps in developing local suppliers. Now that OEMs and Tier 1 suppliers are already established in Mexico, we are beginning to work down the supply chain and add local content. Our approach is specialized as we collaborate with companies and we identify their specific needs. We help integrate local suppliers into the operations of companies such as Bosch, Metalsa, and Nemak. Through Inadem, Bancomex, NAFINSA, SME funds, and our own programs, we can offer a wide range of support to SMEs to help them enter into the automotive supply chain.

Q: What measures have you implemented to tackle the indiscriminate importation of used vehicles from the US?

A: This is one of the biggest concerns for the internal market, both in light and heavy vehicles. These vehicles are not in condition to adequately compete against national vehicles. Alongside associations like CONATRAM and ANPACT, we have created specific norms to ensure that scrap vehicles do not enter the country. These norms will enforce inspections of imported vehicles to make sure they are in good condition and they do not pollute. We are also working alongside NAFINSA and commercial banks on financing schemes which promote the sales of new vehicles. The heavy duty sector has been heavily impacted by the importation, so we are working on a scrapping program where people can exchange their old vehicle for a new one. 

This scheme began in 2014 and it is expected that 15,000 heavy duty vehicles will be exchanged during the year. These programs are geared towards the owner-operators as they are more likely to buy used trucks. Most of the large companies renew their fleets every five years and these old vehicles are then passed on to owner-operators.

Q: What has been the impact of the investment shift in the automotive industry from the North to the Bajio region and how do you maintain a level of healthy competition between states?

A: It is important to maintain a level of healthy competitiveness between states but the federal government must remain impartial. We are neutral and we push for companies to establish themselves in those areas where they will be successful. Obviously, companies analyze and evaluate where they will establish themselves. It is also a matter of logic. For example, if an auto part company wishes to supply Nissan, the logical step would be for it to set up shop in Aguascalientes. The first step is to attract the investment into Mexico and, once it is here, we then look to see where it is viable or desirable to be placed within the industry. There are many factors that influence the location of a company, such as logistics, suppliers, distribution networks, and access to infrastructure. As a federation, we are neutral and we do not favor any states. The decision about location is down to the companies and our role is to see that they can make the most informed decision possible.