Port Congestion Forces Toyota to Explore Alternative Gateways

Congestion at Lazaro Cardenas, Mexico’s largest seaport, is forcing Toyota to look for alternative gateways for its new Prius model, according to a company press release. This development is an ominous sign for Mexico’s expanding automotive industry ahead of burgeoning domestic and US demand. 

Toyota aims to bring approximately 3,500 units of its new Prius model into Mexico before the end of the year, representing a monthly shipment target of 500 units. However, the carmaker’s local logistics experts found that Lazaro Cardenas is overwhelmed with auto imports from other Asian countries, reaching a point of saturation.

AMDA has warned that the nation’s ports are saturated, especially the Pacific gateways. Among them, Lazaro Cardenas has been disproportionately impacted, facing traffic delays of two days at the port, according to GoComet. AMDA has signaled that the problems cannot be resolved immediately, so operational measures have been implemented to mitigate the impact. 

During the first four months of this year, of the 280,314 cars imported via sea freight into Mexico, 169,953 entered through Pacific gateways, with 142,203 coming directly through Lazaro Cardenas. The overreliance on this particular gateway highlights the increased potential for bottlenecks and congestion in the system. 

Until about five years ago, most vehicle imports entered Mexico through the border with the US or through the Gulf of Mexico. This traffic has since shifted to the Pacific coast, processing about 70% of imported vehicles from Asia, with China contributing 18.8%.

To avoid congestion at Lazaro Cardenas and meet its import quota, Toyota explored alternative routes through Acapulco and Mazatlan. However, logistics managers determined that both ports would require infrastructure investment to accommodate increasing vehicle traffic. For example, Mazatlan's vehicle throughput escalated from 2,384 cars in 2021 to 27,181 last year. 

Overall, port congestion raises concerns over Mexico’s capacity to handle soaring flows of auto parts and other traffic as companies regard it as a prime candidate for nearshoring. Auto parts production in the country has climbed well above pre-pandemic volumes. It broke the US$10 billion-a-month barrier in March and INA expects numbers to reach US$112.7 billion this year.

Director General of INA, Alberto Bustamante, revealed that investment in the auto parts industry in Mexico in 1Q23 reached US$398 million, with two thirds of this money coming from the US and 27.2% from Germany. 

Moreover, demand for new vehicles remains strong, with auto sales in Mexico increasing 21.37% in the first five months of this year. North of the border, General Motors and Ford recently signaled stronger than anticipated demand in their home market, as US vehicle production recoveres to pre-pandemic levels.