Image credits: Photo by Alexander Popov on Unsplash
News Article

Mexico Drops to Seventh Place in Global Car Production

By María Fernanda Barría | Wed, 03/31/2021 - 07:13

Mexico ranked seventh in light-vehicle production globally during 2020, reports the International Organization of Motor Vehicle Manufacturers (OICA), according to El Economista. The low performance highlights the impact of the COVID-19 pandemic, which forced manufacturing plants to close for almost three months and at times caused shortages in the supply chain. According to the ranking, South Korea surpassed Mexico and India. "The pandemic is the worst crisis ever to impact the automotive industry, which is a key sector of the world economy," stated OICA's president, Fu Bingfeng.

The global automotive industry had already experienced a decline of almost 5 percent in 2019 as production fell to less than 92.2 million cars, trucks and buses, which broke a ten-year growth streak. Later, the COVID-19 pandemic struck the global automotive sector. The data obtained by the organization demonstrates that automotive production fell by 16 percent globally in 2020 as production fell to less than 78 million vehicles. "The 2020 results wipe off all the growth made over the last ten years," declares Fu.

Light-vehicle production also fell by nearly 16 percent globally during 2020, with all leading productive countries seeing slumps ranging from 11 percent to 40 percent, OICA informs. Mexico used to be the world’s sixth vehicle manufacturer and aspired to surpass India and Germany as automotive plants, technology and direct investments were established in the country, Forbes informs. However, the country can still take advantage of USMCA to negotiate with its neighbors and gain a commercial advantage.

The USMCA’s Rules of Origin establish the new requirements for a vehicle to be considered from the region such as a higher Regional Content Value (RCV), which will gradually increase to 75 percent.  Because of this requirement, it will be necessary to stop importing third parties' components and start buying them in the USMCA region. Therefore, Asian and European companies will have two options, to lose market or establish their companies in Mexico to continue supplying local OEMs. "We always knew that changes would be a significant challenge. However, we also see them as an opportunity to develop projects that we had not considered before, particularly in the value chain with second and third-level suppliers; this could result in the arrival of investment from Europe and Asia. It is essential to highlight the opportunities offered by the USMCA, which can increase the regional content of vehicles and components and foreign direct investment," says José Zozaya, President of the Mexican Association of the Automotive Industry (AMIA).

The data used in this article was sourced from:  
El Economista, OICA, Forbes
María Fernanda Barría María Fernanda Barría Junior Journalist and Industry Analyst