Agustín Ríos
Former Executive Director
INA
/
View from the Top

Mexico Has Not Unlocked Its Full Automotive Potential

Mon, 09/01/2014 - 16:05

Q: How did the Mexican automotive industry reach its pride of place today?

A: The first automotive plant was installed in Mexico in 1925 by Ford. Assembly plants then started to appear, but due to the lack of regulation at the time, imports far outweighed exports which caused an imbalance. In 1962, the first automotive decree was put in place, marking the beginning of the automotive industry in Mexico as it stands. In 1986, Mexico signed GATT, changing the commercial rules forever. In 1989, the last automotive decree was announced, serving as a basis for the NAFTA negotiations. We witnessed exponential growth throughout this process. Since 1950, Mexico has weathered five major economic storms but each time the country has recovered, the automotive industry has distinguished itself by not only recovering but growing in the process. 

Q: How has the influx of FDI into Mexico impacted local automotive companies?

A: If you compare the number of engineers in Mexico today to ten years ago, we have seen exponential growth. Moreover, the quality of these engineers has greatly increased as well. The engineering department at UNAM sees Mexican engineers working alongside top-caliber counterparts from Germany, Japan, the US and Brazil. This is due to the country having three major advantages: longstanding Mexican companies with a wealth of experience, joint ventures that are taking place with foreign companies, and wholly owned foreign companies bringing new technology to the market. Each of these strengths has enabled us to enhance our understanding and innovation of the automotive manufacturing and design processes. 

Q: What role are OEMs playing in developing homegrown auto parts suppliers in Mexico? 

A: Many years ago, when OEMs first came to Mexico, they taught their suppliers a lot more than they do now. Today, they are more reluctant to develop their suppliers, especially those that manufacture essential auto parts. However, for this technological leap to truly be made, there needs to be a joint effort from OEMs, suppliers, the government, educational institutions, and even the tooling sector. The Mexican tooling sector is very poor as it is really only offering maintenance. This is due to the fact that toolmakers have to pay a fee for using primary resources, which does not allow them to be competitive. It is obvious that we all need to work together to help Mexico take that step. But OEMs have distanced themselves from developing suppliers because they want to remain competitive. However, INA’s suppliers are also facing the need to become globally competitive to meet growing demand. The only way for these two segments to help each other is to work together to disperse cost and spread knowledge. 

Q: What impediments need to be overcome for Mexico to produce 4 million cars by 2020? 

A: We will soon produce 4 million vehicles. That figure is actually conservative, given all of the country’s potential. All sectors of the industry need to negotiate in order to come to win-win agreements that will propel this growth. A few years ago, INA and AMIA did not even communicate. Today, we come up with solutions together. We have invited mechanics and their representatives, wholesalers, AMDA, AMIA, ANPACT, and Andellac to the International Congress of the Automotive Industry in Mexico (CIIAM), sponsored by INA. The automotive industry is crucial for the Mexican economy and this goes beyond the OEMs and auto part makers. Guanajuato, Queretaro and Puebla are prime examples of states that have become successful automotive hubs. We must work with the government to reach a production of 10 million vehicles by 2030. Unfortunately, Mexico has the poor habit of changing the direction of key programs when new public figures enter office as they seek to implement different strategic 

visions. 

Q: How detrimental is the importation of used cars on the ability of the automotive industry in Mexico to realize its full potential?

A: In 2010, there were around 24.5 million cars on the streets of Mexico. 41% were over 16 years old, and yet we keep importing vehicles. This is a very unsafe practice. Adding the 14% of vehicles between 12-15 years, more than 50% of cars are old. The US and the EU have implemented successful programs to reduce the amount of old cars in the streets, but Mexico has not followed suit.