After a free fall of almost two years in light vehicle sales and a tough 2018 in terms of production, Mexico started to show signs of recovery in January. Sales increases of 1.78 and 0.3 percent in the light and heavy-vehicle segments in January are low compared to the rates of 2016, but this is still good news for the industry. Moreover, Mexico displaced South Korea as the sixth largest vehicle producer globally and Mexico-made cars increased their share in US’s sales from an average of 14 percent in January 2018 to 17 percent in January 2019.
Some challenges, however, keep hampering the country from reaching its automotive potential. Railroad blockades in Michoacan are forcing automotive companies to use road transportation to move parts and finished cars less cost competitively. According to AMIA, these blockades cost up to MX$1 million (US$520,000) to the country’s automotive sector. Also, the ghost of used vehicle imports from the US continues to hunt the Mexican automotive market. For the first time in five years, these imports increased significantly and amounted to the equivalent of 10 percent of the total new vehicles sold in the country.
On the road to USMCA, US OEMs have the edge in terms of meeting regional content requirements. According to data from INA, Asian and European OEMs only reach an average regional content of 59 and 51 percent, respectively. This will push Japanese investments to concentrate in the segment of auto parts according to JCCI.
Want to know more about what happened over the week? Keep straight ahead!
Starting 2019 with the Right Foot
January 2019 brought a slight recovery after months of contracting results. Sales of light vehicles in Mexico increased 1.78 percent in January 2019, while sales in the heavy vehicle segment managed to grow 0.3 percent in that month.
In terms of vehicle exports, January was a great month for the Mexican automotive industry, according to AMIA. Despite boycotts by unions in the US and Canada, Mexico-made vehicles accounted for 17 percent of the US’ sales.
Mexico has become the sixth largest vehicle producer globally, overtaking South Korea with a total production of 4.1 million units in 2018.
Mexico’s pickup, minivan and SUV production grew 10 percent in January. Around 61.1 percent of all vehicles produced in Mexico are in these segments.
Mexico’s automotive clusters’ network has started operations. Clusters of Jalisco, Nuevo Leon, Coahuila, Chihuahua, State of Mexico, San Luis Potosi, Guanajuato, Queretaro, Puebla and Tlaxcala will collaborate to develop Mexican suppliers.
Blockades, Used-car Imports: Automotive Challenges
Used vehicle imports to Mexico increased for the first time in five years in 2018. According to AMDA, these vehicles amounted to the equivalent of 10 percent of the total number of new vehicles sold in that year.
According to Eduardo Solís of AMIA, railroad blockades of CNTE in Michoacan cost the Mexican automotive industry up to MX$1 million (US$520,000) per day as companies must transport parts and finished vehicles by road.
New FTA, New Opportunities
According to data of INA, US OEMs GM, FCA Group, Ford and Tesla meet a regional content standard of 75 percent. In comparison, Asian and European OEMs only reach an average regional content of 51-59 percent.
According to Takanobu Ito of JCCI, USMCA’s new rules of origin will prompt Japanese investment to concentrate in the auto parts sector.