Mexico’s Auto Industry Seeks Tax Reforms to Boost Vehicle Demand

Mexico’s automotive industry is urging legislative reforms to increase the tax deductibility of vehicle purchases, aiming to stimulate demand for domestically manufactured cars and achieve the federal goal to raise local vehicle production by 10%.

Currently, Mexico’s Income Tax Law (ISR) caps the deductible amount for new car purchases at MX$175,000 (US$10,300) for gasoline vehicles and MX$250,000 (US$14,700) for electric or hybrid models. These limits have remained unchanged since 2008.

“A temporary immediate ISR deduction would create a favorable environment for corporate decisions to allocate production in Mexico for Mexico,” saidGuillermo Rosales, Executive President, Mexican Association of Automotive Distributors (AMDA). 

Under current legislation, individuals with business activities and legal entities can deduct vehicle purchases, whether paid upfront or financed. However, industry stakeholders argue that the capped amounts hinder sales growth and fail to adequately support domestic manufacturing.

The proposal aligns with the objectives of Plan México, which targets a 10% increase in the production of domestically manufactured vehicles. Industry leaders emphasize that achieving this goal requires fiscal incentives to drive local demand.

In a related effort, the National Confederation of Chambers of Commerce, Services and Tourism (CONCANACO-SERVYTUR) submitted a proposal in April to Mexico’s Ministry of Finance. The initiative calls for a full (100%) ISR deduction on vehicles manufactured in Mexico.

“Over the past four years, only 34% of vehicles sold in Mexico were domestically produced, while 66% were imported,” noted Octavio de la Torre, President, CONCANACO-SERVYTUR. He emphasized that reversing this trend would strengthen domestic production, boost the internal market, and contribute to Mexico’s sustainable mobility goals.

De la Torre also highlighted the environmental benefits of replacing older vehicles. “48% of the vehicles in circulation in Mexico are over 16 years old,” he said, noting that aging vehicles contribute to higher emissions and inefficiencies. Incentives for new vehicle purchases would encourage the adoption of cleaner technologies.

The Mexican Association of the Automotive Industry (AMIA) has also endorsed the proposal. Osvaldo Belmont, Technical Director, AMIA, stated that increasing the tax deductibility of vehicle purchases has been “a long-standing priority for the industry.”