Last week OEMs started to announce production stops and reduced shifts to cope with the extreme weather seen in the US and the consequently shortage of natural gas in Mexico. Ford, Nissan Toyota, Volkswagen, GM, Kia, BMW, Audi, Honda and Mazda have announced suspensions.
Industry associations, including AMIA (light vehicle producers), ANPACT (heavy vehicle producers), INA (auto part manufacturers) and AMDA (light vehicle sales), issued a joint statement to Mexican president Andrés Manuel López Obrador asking for support on the matter. "We ask your valuable support, as the president has always shown, to guarantee the supply of electricity and natural gas, so we can keep working together to strengthen Mexico's economy," reads the letter.
"We see with great concern the lack of electricity and the consequent scarcity of natural gas for industrial use added to the affectations of the SARS-CoV-2 pandemic, as well as the uncertainty regarding the future of the Mexican energy sector, which needs to take care of the investments made while avoiding jeopardizing the millions of jobs on which Mexican families depend.”
Production has been reduced on both sides of the border. Extreme cold water has disrupted the US power grid, particularly in Texas and the south of the US. Ford announced temporary closings of its Kansas City, Michigan, Kentucky, and Hermosillo plants. GM announced suspensions at Arlington, Spring Hill, Bowling Green, and Silao. Toyota also announced reduced shifts in Mississippi, Alabama, Baja California, and Guanajuato. Nissan also suspended production in the US and in Aguascalientes.
According to Reuters, Mexico's gas imports via pipeline from Texas dropped about 75 percent over the last week, which put not only automotive but other industrial sectors at peril. Other automotive producers affected in the country are BMW, located in San Luis Potosi; Audi and Volkswagen, both located in Puebla; Mazda and Honda located in Guanajuato, as well as auto part producers.
Oscar Albin, Executive President of INA, affirmed that this situation should be a wakeup call for Mexico to be energy self-sufficient. "Photovoltaic and wind energy industries are a great opportunity. When 40 years ago Russia closed the gas pipeline to Europe, European countries realized they were having a major problem and Germans started to produce wind energy. Although expensive, it was a matter of self-sufficiency, so they funded it and now it is a profitable model," told Albin to El Economista.
Production at most automotive plants is expected to resume by the end of this week, although it is uncertain if this will be at full production or at a reduced capacity. Natural gas shortages add up to semiconductor shortages and strict health measures to cope with the COVID-19 pandemic in some Mexican states.