Tariffs, Mexico’s Slump to Slow Car Demand and Auto Credit: Fitch

The combination of tariffs on the automotive  sector and Mexico’s projected annual economic contraction is expected to slow car demand and decelerate automotive credit growth, according to Fitch Ratings. US tariffs imposed by President Donald Trump are likely to raise car prices, negatively impacting consumer demand.

Fitch forecasts a 0.4% contraction in Mexico’s economy in 2025, partially driven by these tariffs. This slowdown is also anticipated to hinder the growth of automotive credit extended by financial institutions. “After significant growth over the past two to three years, we could see a deceleration in portfolio expansion for these entities,” said Adriana Martínez, Associate Director of Non-Banking Financial Institutions, during a company-organized panel discussion.

According to the Mexican Association of Automotive Dealers (AMDM), financial institutions currently provide eight out of every 10 auto loans in Mexico. While the COVID-19 pandemic caused a temporary slowdown, financial brands have grown steadily alongside automakers and suppliers during the recovery.

Since the start of his second term, President Donald Trump has imposed tariffs on steel and aluminum—key materials in the automotive industry—as well as on cars and auto parts imported into the United States. However, preferential rates apply to components compliant with the USMCA agreement.

Martínez noted that 35% of cars sold last year were manufactured in Mexico, while 8% were imported from the United States and 2% from Canada. She explained that financial institutions are unlikely to experience substantial losses, as most financed vehicles are not expected to face tariff-driven cost increases.

Vicente Saric, Finance Director, NR Finance Mexico, shared a similar perspective: “The majority of vehicles we finance are made in Mexico. The volume of imported vehicles is relatively small, so tariffs are not a major concern for us as a financing company.”

Auto loans have shown robust growth, with real gains exceeding 40% for nine consecutive months from late 2024 through early 2025. This reflects a surge in new vehicle sales, which reached 1.5 million units in 2024—the highest level since 2017. Data from the Mexico’s Central Bank (Banxico) reveals that automotive loans issued by brand-affiliated financial institutions in April 2024 rose by 66.9% compared to April 2023. Meanwhile, the average weighted interest rate for these loans decreased by 0.7 percentage points to 14.4%.