Mexico Sees Sharp 20% Decline in Auto Foreign Investment

Foreign direct investment (FDI) in Mexico’s automotive industry reached US$7.8 billion in the first three quarters of 2025, marking a 20.1% year-on-year decline, according to the Ministry of Economy. This contrasts with recent years' upward trend, when preliminary figures showed inflows rising from US$4 billion in 2022 to US$7.4 billion in 2023 and US$9.8 billion in 2024. Industry stakeholders attribute the slowdown largely to US tariff measures introduced during President Donald Trump’s second term, which began in January 2025.

Ministry data show the sharpest contraction in vehicle manufacturing. From January to September 2025, FDI for car and truck production totaled US$5.9 billion, down 21% year-on-year. Investment in auto parts manufacturing reached US$1.905 billion, a 17.2% decline.

Analysts point to elevated US tariffs on goods not meeting USMCA requirements. Current measures impose a 25% tariff on light vehicles and trucks from Mexico and Canada, excluding those that meet US content standards, as well as duties tied to alleged insufficient cooperation on fentanyl and migration.

Automotive exports also reflected the pressure, totaling US$154.9 billion from January to October 2025, a 4.9% drop compared to the same period in 2024. The sector had shown deceleration in 2024, when exports grew 2.7% to US$193.9 billion after three consecutive years of double-digit gains.

Despite the challenges, Mexico remains the leading supplier of auto parts to the United States. In 2024, US manufacturers imported US$187 billion in auto parts, 42.7% of which came from Mexico.

The automotive industry continues to play a significant role in Mexico’s economy, representing 3.6% of GDP and 18% of manufacturing GDP in 2024 and employing over 1 million people. The Bank of Mexico noted that ongoing global tariff changes may prompt supply chain reconfigurations, potentially strengthening regional trade. In its latest outlook, the bank stated that the 2026 USMCA review “offers an opportunity for Mexico to develop conditions that benefit from supply chain reconfiguration,” with potential growth extending beyond automotive and computing sectors into high-technology industries.