The Last Quarter of the Year: What to Expect in Auto Sector

If there’s one thing that has characterized 2025, it’s the trade war intensified by the tariffs promoted by US President Donald Trump against different countries — and in a highly changeable manner. Mexico has not been the exception, with tariffs of 50% on steel and between 15% and 25% on auto parts, among others. This situation has not stopped domestic automobile and auto parts production, but it has slowed new investments, as companies wait for a clearer outlook before continuing to invest or launching new projects.

One consequence of the tariff war has been the acceleration of supply chain regionalization. Although after the pandemic the industry suffered from the semiconductor crisis and the breakdown of global supply chains, the imposition of tariffs has been stricter on products that do not comply with USMCA rules. This is causing corporations to speed up their search for suppliers in North America, particularly in Mexico, where there seems to be more appetite to meet these needs. At the CLAUT Supplier Development Committee, we have witnessed this phenomenon, as companies are requesting contact with more suppliers to meet their localization needs for components. We have also spoken with companies from India, Spain, Argentina, and others that have already realized they need to establish a presence in Mexico if they want to participate in this growing market.

In the second half of September, authorities from the three countries opened consultations to receive recommendations for the upcoming USMCA review, which will in practice be a renegotiation to take place during 2026. Negotiators are expected to go deeper into several industries, with the automotive sector being one of the main areas of focus due to its economic importance for the three partner nations. Topics that were not as relevant eight years ago will now be discussed, such as new technology vehicle components like lithium batteries and other materials, semiconductors, and the technological content of vehicles and their parts. Rules of origin will be a focal point, where the percentages required for a product to be considered North American are expected to be reaffirmed.

The North American region’s relationship with China will also likely be under review. This is especially significant for the automotive industry, given that the Asian country has achieved global leadership in electromobility. While Tesla has been a leader for several years, the Chinese company BYD has recently surpassed it in both production and sales. However, North American consumers have not fully adopted electric vehicles, and support policies in the United States have largely disappeared. As a result, China has consolidated its position as the world leader in the production of electric vehicles and batteries.

During the USMCA review and renegotiation, the countries are expected to discuss what role China should play in the North American automotive industry. The US government has imposed 100% tariffs on Chinese vehicles to protect its market and local manufacturers. Yet, it remains unclear whether China will be able to produce vehicles in the United States or Mexico and sell them within the region. While these protectionist measures may provide relief to established regional manufacturers, they will likely lead to a technological delay that widens the gap between our region and both Europe and China.

The labor chapter will also be reviewed in this renegotiation. Although there have not been many complaints about noncompliance with the agreements, most cases have been resolved through the established channels, including some that used the rapid response panels. The reality is that the automotive industry in Mexico has been very well organized for many years, so labor issues have been handled in an orderly and efficient way, contrary to what some in the United States and Canada had anticipated. In practice, there is an orderly, fair, and cordial relationship between employers and unions in our country.

Our national associations have been preparing to support the renegotiation process from “the next room,” or whatever collaborative mechanism is ultimately chosen, by providing thoroughly analyzed information and proposals. CLAUT will be collecting data from its member companies to contribute valuable insights that strengthen our industry. When the original USMCA was negotiated, the automotive clusters participated through the INA, providing useful information and serving as a link between negotiators and companies. INA, AMIA, and ANPACT are also in direct communication with their counterparts in the United States and Canada, each contributing relevant information to strengthen the region. While there may be specific cases where a North American manufacturer pursues its own interests, it seems that most of the industry across the three countries views it as essential to maintain an agreement that follows the current USMCA framework.

We therefore expect the year to close amid continued uncertainty due to the possibility of further tariff changes. However, all countries are preparing for the 2026 review and renegotiation, and consultations have already begun across the three nations. In Mexico, these consultations are taking place in various states, including Nuevo Leon, where a participatory session was held on Oct. 10, coordinated by the state’s Ministry of Economy with the presence of the federal Ministry of Economy, which will collect nationwide feedback and take into account the concerns of companies from all relevant sectors.

Finally, we have observed that several projects have resumed in the last quarter of the year. While it is not a radical change, we have noticed that some companies have restarted product development or investment projects that had been on hold throughout the year. There has also been an increase in visits from foreign companies seeking to establish operations in the state and others looking to expand their markets. This appears to be a positive sign of confidence that we hope will be confirmed at the beginning of the year. Despite the tariff uncertainty, customer demands must be met, and production must continue. We expect to close the year once again with 4 million vehicles produced in Mexico and exports around 3.4 million units — figures that encourage us despite the political pressures that have sought to derail the strong trade relationship we maintain in North America. We trust that reason will prevail and that, by the end of the USMCA renegotiations, North America will remain the most competitive region in the world.