Mexican Domestic Auto Market Posts Growth
The performance of the Mexican domestic automotive market was positive at the end of 2022. A total of 1,086,058 light vehicles were sold, which meant an annual advance of 7.0% compared to 2021.
Four segments presented increases: SUVs (22.9%), Pickups (17.7%), Compacts (5.3%), and Luxury (5.3%). In contrast, the Subcompacts (-15.8%) and Sports (-6.8%) segments presented declines in an annual comparison.
Consumer preference remains inclined toward the SUVs segment, representing a market share of 37.7%. In second and third place are Subcompacts and Compacts vehicles with a market share of 22.0% and 19.6%, respectively.
Regarding the heavy duty vehicles market, as of December 2022, retail sales were registered for 39,680 units, with an annual advance of 24.1%.
This good performance during December is attributed to an improvement in product availability; however, sales levels have not exceeded those observed in the pre-pandemic period (2019); the sale of light vehicles is still below -17.6%, while the retail sale of heavy vehicles is lagging -5.7%.
The supply shocks due to the lack of inventory in the brands greatly affected the performance of the market during the first months of the year. It is important to highlight that 67.2% of the new vehicles sold in the country are imported, while the remaining 32.8% corresponds to national-origin units.
During 2022, imports of vehicles of Chinese origin for sale in the domestic market showed significant growth, with accumulated figures showing the annual advance was 117.5%; thus, China is positioned as the leading country in vehicle imports, concentrating 23.8%.
As of December 2022, the sale of products imported from China represents 16.0% of the domestic market. This participation has increased from 6.6% registered in 2018.
Thanks to the greater flow of inventory coming mainly from China, the USs, Brazil, Japan, India, and Thailand, waiting times at distributors have shown an improvement. At the end of the year, there was an average of fewer than two months of waiting.
Whereas the credit offer remains solid and positive, it is in a restrictive context due to the increase in the reference interest rate as part of the strategy implemented by the Mexican Central Bank to combat inflation. Currently, the interest rate is at f 10.5%. The next decision on monetary policy will take place on Feb. 9, 2023.
The credit portfolio granted to households by commercial banks indicates that, as of November, the past-due portfolio of automotive loans stands at 1.42% of the total portfolio. This is a considerably low level and far from other credits as they are personal, payroll, credit cards, and home loans.
In a scenario in which interest rates are expected to continue to rise, the downward trend in automotive credit granted to households gives us a good forecast for the supply and contracting of credit. It is important to remember that, of the total new vehicles sold, 59.7% had the support of financing.
AMDA's forecast for 2023 indicates that 1,126,724 light vehicles will be sold in the country, which would represent an annual advance of 3.7%, while the retail sale of 42,128 units is expected in the heavy market, with an estimated growth of 8.2% concerning 2022.
A slow but constant recovery of the domestic market is expected. Among the main challenges are the weakness on the demand side, inflationary escalation and the increase in the interest rate that could put a focus on the weakness of households.
The supply shocks will continue during 2023 but with a minor impact. The issue of inventory availability continues to be a matter of concern for some brands, and the low visibility could hinder commercial strategies.
Political factors are relevant issues for the recovery of the domestic market, and a negative impact is estimated from the regularization of smuggled vehicles. As of Dec. 28, 2022, 1,047,142 vehicles were regularized in the country. Insofar as imported used vehicles totaled 180,680, this figure is equivalent to 18.7% of the total market sales from January-November 2022.
According to the specialists surveyed by the Bank of Mexico, a pessimistic perspective regarding the business climate remains. Political decisions, such as the regularization of contraband vehicles, as well as insecurity problems in the country could negatively affect the environment and national economy.