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Article based on an interview with Eduardo Solís, Executive President of AMIA.
Q: What are your growth projections for Mexican manufacturing operations based on 2016’s results?
A: The goal for 2017 is to manufacture 3.5 million vehicles. During the first three months of the year, production rose 17.1 percent, mainly fueled by the incorporation of new manufacturing facilities from Kia and Audi. In addition, several plants increased production compared to last year when production was hampered by the reduction in vehicles produced as some OEMs switched vehicle platforms. Production is closely linked to Mexican export destinations. Although there is currently a preference toward larger vehicles and SUVs in the US, I would not expect Mexican plants to shift their production toward these models. Mexico is mainly focused on manufacturing compact vehicles and switching platforms to incorporate larger models is a complicated process.
Q: What opportunities do you see regarding financing, considering its importance to growing domestic sales?
A: Financing has played a crucial role in the domestic market’s development. Almost 70 percent of all vehicles sold in Mexico are bought through a loan. The international benchmark for financing is 85 percent, which means there is still room for growth. Longer payment terms are becoming more attractive for clients and financing institutions, and both banks and multiple-purpose financial institutions (Sofomes) are promoting these terms as a sign of certainty in the development of the domestic market and in Mexico’s economic situation.
Q: What impact do you expect Chinese newcomers like BAIC and JAC will have on competition in the domestic market?
A: It is still uncertain what kind of impact these companies will have. What remains true is that all commercial directors are implementing strategies to maintain and grow their current market share. We are already in contact with both BAIC and JAC, which are not yet members of AMIA.
Q: What are your projections for electric vehicle sales, especially after the increase in gas prices?
A: We expect to see more and more of these vehicles on the streets, especially after the increase in gasoline prices, but fiscal or technological breakthroughs are still needed before Mexico sees a drastic increase in demand. Right now, there are almost no incentives to purchase and use electric vehicles, unlike in other places like California, where clients receive a US$7,500 incentive from the federal government plus US$2,500 more from the state government. These incentives are necessary because costs related to these vehicles are still too high. Batteries remain too expensive but as soon as the technology becomes more affordable, governments will no longer have to resort to financial compensation for clients.