Mexico Becomes US’s Top Foreign Vehicle Supplier

Mexico has overtaken Japan as the US’s leading foreign automotive supplier. In 2022, Mexico’s vehicle exports surpassed US$36.54 billion, a 21.8% increase from the previous year. Mexico also raised its supply of EVs to the US, displacing Canada to become the US’s fourth EV supplier.

Shipments from Japan totaled US$34.18 billion, a 0.9% decrease when compared to 2021. This allowed Mexico to become the top foreign supplier of vehicles to its Northern neighbor. Mexico has a critical role in the US automotive industry, as the USMCA and the country’s competitive pricing and proximity allow automakers to establish closer to the world’s largest automotive market.

Japan was the top exporter of EVs to the US with exports valued at US$6.3 billion. South Korea followed with US$5.87 billion, Germany with US$5 billion, Mexico with US$2.6 billion and Canada with US$2.19 billion, according to El Economista.

Mexico’s bet to boost EVs manufacture comes hand-in-hand with the industry’s efforts to build a more sustainable sector. EVs manufactured in Mexico have a clear advantage over those manufactured in other regions, as those assembled in Mexico are eligible for the federal tax credit incentive under the US’s Inflation Reduction Act of 2022.

This is a US$7,500 consumer income tax credit that can be used for the purchase of EVs and batteries assembled in North America. The act was celebrated last year by experts in Mexico’s automotive industry. “In our region, we produce together to compete globally. We must deepen our productive integration to provide well-being to our societies and leave no one behind. We will continue to monitor [the bill’s] passage through the House of Representatives,” says Mexico’s Ministry of Economy (SE), as reported by MBN.

Mexico’s Role as the Host for Nearshoring Strategies

In 2022, trade in goods between Mexico and the US reached a total of US$779.3 billion, a 17% increase from the previous year. US direct investment in Mexico amounted to US$15 billion, making up 42.56% of the total foreign direct investment.

According to Pedro Casas Alatriste, Director General, American Chamber of Commerce of Mexico, this signals a key growth period driven by regional integration. Now the choice is where to invest in Mexico, as the country’s different regions bring diverse advantages and disadvantages.