The Micro Parts Industry Will Continue to Grow

The automotive micro parts supply chain has grown over the last couple of years as a consequence of nearshoring in Mexico. According to INEGI, the auto parts industry grew by more than 10%, exceeding US$4 billion in sales. 

Carlos González, Director General, Hultek, a rubber parts supplier for vehicles, underscored that the development of new technologies such as hybrid or electric cars, sustainability trends and new on-demand mobility options will require the growth of automotive micro parts suppliers. Each car requires at least 30,000 different parts to run various internal systems like electricity, combustion and safety, among others. In this regard, the National Export Manufacturing Industry Council (Index) pointed out that the supply chain of vehicle micro parts will continue to follow the nearshoring demand, which is expected to receive US$11 billion dollars of new investments in 2023. 

One of the main drivers of the auto parts industry for Mexican providers is the USMCA treaty, as it states that all vehicles must have at least 75% regional content, that is, three-quarters of the vehicles marketed through the USMCA must have internal parts made in the North American region. INEGI reported that at the close of 2022, car production in Mexico rebounded by 9.24%. Meanwhile, in terms of Foreign Direct Investment (FDI), the auto parts industry grew more than 10%, exceeding US$4 billion.

According to the US Department of Commerce, the main consumer of Mexican-assembled vehicles is the US market, in which Mexico has reached a 37.9% share in total automotive imports from January to September 2022. Moreover, experts highlighted that this percentage may increase: according to a study performed by Consumer Reports, 36% of US citizens would consider buying or renting an electric vehicle due to the massification of this technology. Statista pointed out that the sale of hybrid and electric cars is expected to exceed 30% by 2023. As a result, this change of habits in vehicle consumers will result in an increased supply of specialized parts to meet the demand.

Carlos González, Director General, Hultek, stressed that these opportunities also represent a challenge for the Mexican industry, as regional suppliers must guarantee certain requirements. These include providing more robust logistics programs, integrating real-time tracking technology for the production processes of each part that is manufactured and implementing automation in the supply chain. "Supply demands may increase considerably. If suppliers and Mexican SMEs want to serve that market, it is best to seek rapid scalability and offer the right conditions, which range from certifications to infrastructure and logistics," González said.

According to the Mexican Association of the Automotive Industry (AMIA) and the National Auto Parts Industry (INA), Mexico has 21 vehicle-owning plants, 10 engine-producing plants and seven transmission manufacturers distributed in 12 states of the Republic.