Mexico’s Auto Industry Prepares for Tariff, Supply Chain Shocks

Mexico’s automotive sector is preparing for another round of price increases, driven by new US tariffs on raw materials, potential import duties on Chinese vehicles, and a renewed global shortage of semiconductors.

According to dealership staff in southern Mexico City, automakers are expected to adjust prices in the coming months. “Because of tariffs, prices have to be adjusted. Brands will likely make the first change at the beginning of the year,” said Miguel, a car salesman at Avenida Universidad, to Expansión.

Manufacturers report that between 2021 and 2023, new vehicle prices in Mexico rose nearly 25%, the steepest increase in a decade. Previously, annual adjustments ranged between 3% and 4%, leaving few models priced below US$13,800.

Chinese automakers helped stabilize prices during that period by offering vehicles up to MX$100,000 below the market average. Brands such as BYD, JAC, MG, and Chirey gained market share with affordable electric and gasoline models. The 2024 price war between JAC’s E10X and BYD’s Dolphin Mini pushed electric vehicle prices below MX$360,000, prompting competitors like Renault to cut prices as well.

Mazda and Suzuki followed suit. In 2024, Mazda reduced prices on several models by up to MX$30,000, citing a competitive market and a favorable exchange rate. “We reacted to the market to maintain our position,” said Miguel Barbeyto, President, Mazda México. Suzuki also launched nationwide discount campaigns, lowering prices on its Grand Vitara and Swift Sport models.

That period of relative stability may soon end. Since April, the United States has maintained new tariffs on steel, aluminum, and auto parts imports, including materials from Mexico. Ford expects a US$5 billion impact, while General Motors projects losses near US$3 billion. Consultant Warren Browne estimated the additional cost could reach US$2,300 per vehicle.

Meanwhile, Mexico’s Ministry of Economy is considering tariffs of up to 50% on vehicles imported from countries without free trade agreements, including China. Svein Azcue, Chief Operating Officer, Grupo Chirey, said, “Prices will be affected, but not in a black-and-white way. Some products will rise gradually, others less so. We’ll remain competitive with high-technology, well-equipped products.”

A renewed chip shortage adds further strain. The disruption began after the Dutch government took control of Nexperia, a Netherlands-based semiconductor firm owned by China’s Wingtech, and Beijing banned exports of its products. The restriction has already led to production adjustments across North America. Honda suspended operations at one plant in Mexico and reduced output in the United States and Canada.

The industry recalls 2021, when semiconductor shortages caused months-long delays and financial losses. This time, with inflation and logistics costs already high, automakers have less flexibility.

On the sales floor, customers are responding to uncertainty. “What costs MX$500,000 today could be MX$530,000 in January,” said Miguel.