Navigating Change to Ensure Sector’s Growth

The panorama of the automotive sector looks positive despite the change and uncertainty sweeping across the industry, according to Fausto Cuevas, Director General of AMIA, who believes the tools already exist in Mexico to make the industry thrive again.

Fausto Cuevas, Director General of AMIA, told the audience at Mexico Automotive Summit 2019 that the country's automotive industry has several opportunities but also faces challenges in the coming years to continue being competitive worldwide. "The automotive industry has positioned itself as one of Mexico's main industries, contributing to job creation, currency generation and trade balance. A continuing drive for achievement is essential for both the industry and Mexico,” he said at the Sheraton Maria Isabel Hotel in Mexico City on Wednesday.

In his closing presentation, Cuevas highlighted the industry’s substantial contribution to the Mexican economy. "About 3.7 percent of the country's GDP comes from the automotive industry, with an annual generation of US$83 billion and exports of spare components and complete cars to over 100 nations," he said.

But the industry’s impact extends beyond its own boundaries. "Job generation and economic spillover transcend the sector's immediate advantages and shows that the arrival of new companies contributes to the surrounding communities," Cuevas said. "For example, the arrival of BMW and the expansion of Toyota in Guanajuato generated indirect jobs at restaurants and other service segments.”

AMIA had projected an increase in the number of units manufactured by 2020 but a number of factors were altering expectations. "There are opportunities for development,” Cuevas said, “but the USMCA agreement and political changes in Mexico have added change and uncertainty to the expectations of the industry and its players.”

According to Cuevas, the USMCA change in the laws of origin for vehicles was among the treaty’s greatest modifications. "The renegotiation increased the regional origin content from 62 to 75 percent. It is now essential to confirm that 75 percent of the components and 70 percent of steel and aluminum come from the area, as well as guaranteeing the employment of regional talent for the sector,” he explained.

Greater competition from countries in North America, Europe and Asia also must be factored into the equation. “South Korea is among the countries that competes directly with Mexico and generates pressure on the Mexican industry to keep international players and investors interested in the country,” he says.

However, Cuevas believes that despite the pressures and uncertainty, there are forces generating opportunities for the sector. "There is a strong transition from internal to electric combustion vehicles worldwide and Mexico is adding to this wave of change," he said. "A clear example is the renovation of the Ford plant in Cuautitlan to produce electric cars."

In addition to the tools that the sector has to capitalize on emerging opportunities, Cuevas said that R&D centers will be key for the near term. “There are more than 300 R&D centers between the industry, academia and government that are driving the sector. We have all the necessary tools and conditions to grow the industry. It's just a matter of navigating through the obstacles,” he said. "Progress will come in a matter of time because the opportunities, conditions and knowledge already exist. In spite of the barriers, I believe the automotive sector will continue to develop positively in Mexico.”

The panorama of the automotive sector looks positive despite the change and uncertainty sweeping across the industry, according to Fausto Cuevas, Director General of AMIA, who believes the tools already exist in Mexico to make the industry thrive again.

Fausto Cuevas, Director General of AMIA, told the audience at Mexico Automotive Summit 2019 that the country's automotive industry has several opportunities but also faces challenges in the coming years to continue being competitive worldwide. "The automotive industry has positioned itself as one of Mexico's main industries, contributing to job creation, currency generation and trade balance. A continuing drive for achievement is essential for both the industry and Mexico,” he said at the Sheraton Maria Isabel Hotel in Mexico City on Wednesday.

In his closing presentation, Cuevas highlighted the industry’s substantial contribution to the Mexican economy. "About 3.7 percent of the country's GDP comes from the automotive industry, with an annual generation of US$83 billion and exports of spare components and complete cars to over 100 nations," he said.

But the industry’s impact extends beyond its own boundaries. "Job generation and economic spillover transcend the sector's immediate advantages and shows that the arrival of new companies contributes to the surrounding communities," Cuevas said. "For example, the arrival of BMW and the expansion of Toyota in Guanajuato generated indirect jobs at restaurants and other service segments.”

AMIA had projected an increase in the number of units manufactured by 2020 but a number of factors were altering expectations. "There are opportunities for development,” Cuevas said, “but the USMCA agreement and political changes in Mexico have added change and uncertainty to the expectations of the industry and its players.”

According to Cuevas, the USMCA change in the laws of origin for vehicles was among the treaty’s greatest modifications. "The renegotiation increased the regional origin content from 62 to 75 percent. It is now essential to confirm that 75 percent of the components and 70 percent of steel and aluminum come from the area, as well as guaranteeing the employment of regional talent for the sector,” he explained.

Greater competition from countries in North America, Europe and Asia also must be factored into the equation. “South Korea is among the countries that competes directly with Mexico and generates pressure on the Mexican industry to keep international players and investors interested in the country,” he says.

However, Cuevas believes that despite the pressures and uncertainty, there are forces generating opportunities for the sector. "There is a strong transition from internal to electric combustion vehicles worldwide and Mexico is adding to this wave of change," he said. "A clear example is the renovation of the Ford plant in Cuautitlan to produce electric cars."

In addition to the tools that the sector has to capitalize on emerging opportunities, Cuevas said that R&D centers will be key for the near term. “There are more than 300 R&D centers between the industry, academia and government that are driving the sector. We have all the necessary tools and conditions to grow the industry. It's just a matter of navigating through the obstacles,” he said. "Progress will come in a matter of time because the opportunities, conditions and knowledge already exist. In spite of the barriers, I believe the automotive sector will continue to develop positively in Mexico.”