Mexico’s Auto Parts Sector to Attract US$2.5 Billion in 2024

Mexico’s auto parts industry could finish 2024 attracting over US$2.5 billion in foreign direct investment (FDI), says INA. The association notes the increasing production of electric vehicles (EVs) in the United States positively impacts the sector, as electric parts and components contribute to 35% of auto parts exports.

According to INA, the US$2.5 billion in FDI for the auto parts sector could represent a 23.5% increase over the previous year, reflecting growing interest from companies seeking to operate in Mexico. Gabriel Padilla, Director General, INA, emphasized the automotive sector's shift toward electromobility and advanced manufacturing technologies will drive this investment, particularly from German and US companies. 

According to INA’s statistics, the auto parts sector in Mexico achieved US$1.63 billion in FDI in 1H24, marking a 15.09% increase compared to the same period in 2023.

However, Padilla told El Economista that investment activity slowed in 1H24 due to political uncertainties in both Mexico and the United States, which created some hesitation among business leaders. Despite this, he projected that Mexico will continue to be an attractive destination for foreign investment in the coming years, particularly in electromobility and the use of Industry 4.0 manufacturing processes, which require specialized labor.

INA expects to see an increase in FDI for 2025, with projections of US$2.7 billion to US$2.8 billion. The forecast for North American inflation is expected to be lower in 2025, which could increase demand for parts and components from Mexico. Padilla noted that while growth may moderate in 2025, the US automotive industry is expected to expand, contributing to a sustained demand for auto parts.

Growing EV production in the United States is leading to a rise in the production of electric parts in Mexico. Wiring harnesses, for example, make up 19.55% of the nation’s auto parts production. Other key segments include transmissions, clutches, and related parts at 9.95%, seat fabrics and carpets at 9.06%, and engine components at 7.86%. “Mexico has made significant advances in the production of key components for electric and hybrid vehicles, which represent 35% of the sector's exports. However, it is necessary to improve infrastructure and develop local suppliers that meet the certifications required by Tier 1 companies and automakers,” Padilla told MBN, adding that tackling these areas could lead to an increase in annual exports of electrical parts and components by up to 15%. 

During the first nine months of 2024, Mexico’s auto parts production grew by 3.22%, with projections indicating a year-end total of US$124.48 billion. Additionally, the trade surplus in auto parts reached US$26.39 billion, driven by strong exports to the United States and Canada, reports INA. Furthermore, INA noted that during the first nine months of 2024, Mexico's auto parts production grew by 3.22%, consolidating projections for a year-end total of US$124.48 billion.

Challenges for the Mexican Auto Parts Industry

As the revision of the USMCA scheduled for 2026 approaches, the auto parts sector prepares to address key challenges, like adjusting the Rules of Origin to incorporate electronic, electrical, semiconductor, hardware, and software components, which are crucial for modernizing regulations and strengthening supply chain integration. Additionally, INA actively engages with its North American counterparts to ensure a collaborative approach and maintain a regional focus on commercial integration, rather than bilateral agendas. “The automotive and auto parts industry is one of the most integrated in North America, which makes it less vulnerable to potential changes. It is essential to maintain a regional focus, prioritizing commercial integration in North America rather than bilateral agendas,” Padilla told MBN.