Nemak Stock Drops 4%; CEO Weighs US Shift Amid Tariff Risks

Nemak, a manufacturer of aluminum components for electric and combustion engine vehicles, saw its stock value drop 4% following lower-than-expected revenue. The company is evaluating the potential relocation of part of its Mexican production to the United States if new tariffs are imposed by the US government, CEO Armando Tamez revealed during a financial results call. However, he emphasized that any relocation would occur only if economically viable.

Tamez stated that ongoing trade negotiations between the United States and Mexico could avert tariffs, but Nemak is preparing contingency plans for less favorable outcomes. While the company has limited additional capacity in its six US plants located in Tennessee, Kentucky, Alabama, and Wisconsin, any production shift would hinge on cost-effectiveness. Tamez also highlighted the higher operational costs in the United States, which would necessitate price adjustments.

According to Tamez, paying tariffs could still be more cost-effective than relocating production, given the significant capital expenditure involved.

Nemak supplies engine heads, engine blocks, and chassis components to automakers such as General Motors, Ford, Audi, BMW, Nissan, Stellantis, Mercedes-Benz, and Kia. Its Mexican facilities produce all components for the local market, while customers manage exports to the US and other regions.

Tamez reassured stakeholders that any potential tariffs would not be absorbed by Nemak, as price adjustments are stipulated in its contracts. He cautioned that production shifts could have broader implications for Mexico’s US$115 billion auto parts export industry, which is dominated by US-based companies.