Mexico Auto Parts Sector Sheds 90,000 Jobs Despite Record Exports

Mexico's auto parts manufacturing sector lost about 90,000 jobs between 2024 and 2026 despite record production and export levels, as automakers including Volkswagen, Toyota, General Motors, and Hyundai adjusted output amid US tariff pressure and cost optimization. Auto parts, which generate 41.5% of automotive employment in Mexico, supplied 44.7% of US auto parts imports in the same period, the highest share on record, while the share of Mexican-made components meeting USMCA rules of origin rose from about 50% to 80%. The National Auto Parts Industry (INA) attributes the losses to efficiency gains and cost pressure rather than plant closures. 

Mexico's auto parts manufacturers have shed approximately 90,000 jobs over the past two years, even as component production and exports to the United States reach record levels, according to the National Auto Parts Industry (INA). The job losses are concentrated in the supply chain, not in final vehicle assembly, and coincide with a broader slowdown in automaker production volumes tied to US tariff policy.

Auto parts manufacturing generates 41.5% of total automotive employment in Mexico, the largest share of any segment in the sector, according to the most recent Automotive Industry Dialogues report. The pullback comes as automakers adjust output: Volkswagen reduced production volumes of the Jetta and Tiguan models at its Puebla plant, while Toyota, General Motors, and Hyundai have each announced similar volume adjustments this year.

"The dynamism the automotive sector brings, particularly auto parts, has allowed the country to absorb those pressures nationally. However, when a specific state is affected, as is the case with Puebla, it obviously generates a lot of concern about how to absorb that available labor force, and not just in Puebla, but across the entire Center-Bajio corridor," says Gabriel Padilla, Director General, INA.

Efficiency Gains Outpace Hiring

The labor contraction runs counter to the sector's output trend. Between January and May, national auto parts production reached US$58.9 billion, a 10% increase over the same period in 2025, according to INA figures. That growth has cushioned part of the impact from lower assembly volumes at individual plants, but it has not translated into a proportional employment recovery.

Padilla attributes the gap to an ongoing efficiency drive rather than to demand weakness. Companies have shifted production platforms, adopted new technologies, and pressured margins, pushing manufacturers to extract more output from existing installed capacity instead of expanding headcount. "The industry has been using the installed capacity that was available and has been becoming more efficient. This has led, in hiring and workforce configuration, to an adjustment that, combined with other factors such as regulatory pressures and accumulated wage cost increases, has generated pressure," Padilla says.

Independent data supports the trend. Mexico's automotive manufacturing employment fell to 742,000 workers in April, a decline of 107,000 positions over two years, with parts manufacturers accounting for 91,000 of those cuts, according to Mexico Business News, citing Inegi's Monthly Manufacturing Industry Survey. Vehicle and truck assembly plants reduced 10,000 positions in the same period, while body and trailer manufacturers cut 6,000 jobs, underscoring that the contraction is heavily weighted toward the supply chain rather than final assembly.

The employment decline has not weakened Mexico's standing as a supplier. Of the total auto parts imports made by the United States, 44.7% originated in Mexico, the highest share on record, according to INA. The share of Mexican-made components meeting USMCA rules of origin has also climbed, rising from approximately 50% before the current US administration took office to 80% today.

"Automakers, in their investment projects, are seeking greater localization of national suppliers, and that is a great opportunity for our automotive supply chain to not be focused only on Tier 1 and Tier 2, but to broaden the base," Padilla says. Francisco González, Executive President, INA, adds that Mexico's share of US auto parts imports climbed from 42.5% to 44% year over year, saying that recent OEM portfolio realignments "do not directly affect" the underlying strength of the industry.

No Signs of Dismantling: INA 

The USMCA joint review, alongside continued uncertainty over North American trade rules, adds another variable to the outlook. INA considers preserving the treaty's preferential access conditions, including the 0% tariff for compliant components, essential to sustaining Mexico's export performance.

"Those record levels we have seen in recent months in the participation of auto parts in US vehicle manufacturing stem from this climate that we want to see preserved in the USMCA: maintaining this preferential access condition of 0% tariff for those auto parts that meet USMCA rules. We want this condition to continue," Padilla says.

INA acknowledges the loss of approximately 90,000 jobs over two years but maintains that the figure does not yet represent a dismantling of Mexico's industrial capacity, noting that no auto parts plant closures have been announced to date. "We are seeing very turbulent times of many changes, but this does not mean the dismantling of industrial manufacturing capabilities," Padilla says.

The state government of Puebla, where Volkswagen concentrates its largest Latin American complex, has said no official figure for affected workers has yet been confirmed, though it has opened thousands of vacancies through the national employment service to help absorb potential displacement.