Mexico Auto Sector Faces 10-Year Stagnation in Assembly Plants

Mexico's automotive industry is approaching a decade without the announcement of a new light-vehicle assembly plant as uncertainty surrounding the review of the United States-Mexico-Canada Agreement (USMCA) continues to delay long-term investment decisions. The United States' decision not to immediately extend the agreement for another 16 years, opting instead for annual reviews that could continue through 2036, has intensified concerns across North America's integrated automotive supply chain, despite record vehicle sales and continued investment in auto parts and manufacturing infrastructure.

The uncertainty follows the announcement by the Office of the United States Trade Representative (USTR) that Washington will maintain the USMCA while negotiations with Mexico and Canada continue, but will not renew the agreement under its current extension mechanism. The decision has renewed industry concerns over the stability required for investments that typically operate on 10- to 20-year planning cycles.

The Mexican Automotive Industry Association (AMIA) responded by urging the three governments to accelerate negotiations and preserve the trade framework that has supported regional manufacturing integration for more than three decades.

"We regret today's announcement by the US government not to renew the USMCA, as we believe it does not recognize the successful integration process that has been built over more than 30 years among Mexico, the United States and Canada," AMIA said.

The association added that regional integration "has generated significant economic and social benefits for all three countries, becoming a pillar of North America's global competitiveness." AMIA emphasized that the automotive sector remains the clearest example of this regional manufacturing integration.

"The automotive industry is the clearest example of the success achieved by this trilateral integration," the association said. "This decision does not contribute to generating the certainty required by the automotive industry, which has already been affected for nearly a year and a half by Section 232 tariffs that have placed Mexico at a disadvantage compared with other countries and require urgent solutions."

Long-Term Investments Face Greater Risk

Industry analysts say the review process introduces uncertainty that could discourage new assembly plant investments.

"Large capital investments such as automotive projects require certainty in the business environment and clarity in public policy before a single dollar is committed," said Calum MacRae, Executive Director of Supply Chain and Technology, S&P Global Mobility in comments to Expansión.

MacRae warned that additional trade measures or changes to the agreement would further weaken investor confidence. "If the US administration resorts to new trade threats or modifies the conditions of the agreement, the uncertain environment will intensify and automotive investment commitments in Mexico will decline," he said.

The concerns mirror the investment slowdown experienced during the first Trump administration, when uncertainty surrounding the renegotiation of the North American Free Trade Agreement contributed to delays and cancellations of major manufacturing projects.

One of the most significant examples was Ford's decision to cancel its planned US$1.6 billion assembly plant in San Luis Potosi, a project announced before changes in market conditions and trade policy altered the company's investment strategy. 

Record Sales, But No New Assembly Plants

Despite stronger vehicle demand, Mexico has not attracted a new light-vehicle assembly plant announcement since the investment wave between 2011 and 2016, when manufacturers including Nissan, Mazda, Honda, Toyota, Kia, BMW and Audi committed more than US$8 billion to new production facilities.

According to S&P Global Mobility, those projects and plant expansions added more than 2 million units of production capacity, representing 31.2% of global capacity growth during that period.

Mexico has yet to reach the expected production milestone. The country assembled 3,953,494 light vehicles in 2025, remaining below the projected 5 million-unit threshold. Investment has not disappeared from the sector, however. S&P Global Mobility reported that automotive investment exceeded US$3.5 billion during the third quarter of 2024, the highest quarterly level in a decade.

Most of those resources have been directed toward auto parts production, logistics, industrial parks, and supplier expansion rather than new vehicle assembly plants.

As governments begin the formal review process, Ford Motor is advocating changes that reward manufacturers with higher North American production levels. CEO Jim Farley said the company wants revised rules that better recognize automakers with larger regional manufacturing footprints.

"It is essential that any new agreement makes it easier, not harder, to compete with manufacturers in the United States that import vehicles from Japan, South Korea and other global competitors," Farley said. "That is the key for us."

The investment uncertainty contrasts with continued expansion in Mexico's domestic automotive market. According to INEGI, Mexico sold 754,394 new light vehicles in 1H26, a 5.3% year-over-year increase and the strongest January–June performance on record.

June sales reached 126,778 units, up 7.6% from a year earlier, making it the third-highest June result since records began in 2016. Even with record sales, industry organizations warned that future production and investment decisions will depend on greater certainty regarding regional trade rules.

Banamex also said that the absence of an immediate 16-year extension is likely to continue weighing on private investment, as manufacturers face increased uncertainty regarding long-term market access and regulatory conditions.