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Fronterview's Outlook on the Mexican Automotive Industry

By Alejandro Enríquez | Fri, 05/07/2021 - 06:00

Market intelligence firm FrontierView shares its highlights on the Mexican automotive industry, adding that prospects for the sector look “positive despite a slow economic recovery.“Mexico has become the worst-hit country in Latin America from COVID-19, though some sectors like the automotive industry will help boost the economy," says the company in a statement.

FrontierView argues that Mexico will not reach herd immunity until 2022, rather than in 2021 as in other countries in the region, a perspective shared by partners from IHS Markit, Deloitte and KPMG. "As of March 23, 2021, Mexico has access to 4.6 vaccines per 100 people, compared to 46.9 vaccines per 100 people in Chile," the statement reads.

The country's industry forecast becomes challenging amid President Andrés Manuel López Obrador’s reforms on the energy and oil and gas sector. While FrontierView expects the peso to appreciate against the US dollar, the currency will not recover what it lost in 2020 due to the pandemic. "The peso has appreciated by around 16 percent, after reaching the threshold of 25 MXN/USD in early May 2020 during the COVID-19 shock. Since then, the peso has remained stable through AMLO’s policies and the Trump administration, but the risk is still there."

Mexico's auto sector, alongside agriculture and other manufactured goods, will play a strategic role in boosting the country's exports during 2021. USMCA will also continue to strengthen Mexico's auto part and vehicle manufacturing. "The automotive industry will be strengthened by the USMCA, growing automotive exports by up to 8.98 percent. Exports took a nosedive last year because of weak US demand and the shutdown of most of the auto plants in Mexico, but the strong rebound of the US economy in 2021 will help acceleration," the company says.

USMCA's 'substantial' challenges will arrive after 2023, when the rules of origin for automotive goods (particularly for the light vehicle segment) are expected to reach their desired goals. During Mexico Automotive Summit 2021, Alejandro Valerio, Associate Practice Leader Mexico and Central America at FrontierView, addressed how the automotive industry will be the winner in Mexico’s economic recovery and detailed the key variables to consider in the short and medium term. Among other industry variables, Valerio pointed out vaccination, the peso's stability, government stimuli, external demand and Mexico’s export competitiveness as key elements in the country’s recovery.

FrontierView works with Mexico Business through MexicoView, a premier community of multinational business leaders operating in Mexico that offers rigorous research, executive focus and business advisors.

Photo by:   Tomasz Frankowski
Alejandro Enríquez Alejandro Enríquez Journalist and Industry Analyst