This is an excerpt from the 2019 edition of Mexico Automotive Review. Don’t miss the opportunity to get the latest insights from key automotive players. Register now to get your tickets for Mexico Automotive Summit on October 2, 2019!
Óscar Albin is the Executive President of the National Auto Parts Industry (INA). This civil association represents the interests of auto parts manufacturers based in Mexico and promotes the growth and development of its member-companies in the original equipment and aftermarket segments.
Q: How can Mexico maintain its position as the fifth-largest supplier of automotive components worldwide?
A: Mexico has several characteristics that make it attractive for the production of automotive components. One is its geographic proximity to the US and Canada. We are the only low-cost country in the North American region, so the 17 million vehicles produced in the NAFTA region have Mexican auto parts. The strength of the US market has given us the opportunity to grow in past years. We are the most important supplier of auto parts to the US and Canada. Another advantage is the renegotiation of NAFTA, now USMCA. Although it is still pending ratification in Canada and the US, its successful renegotiation provided guarantees to investors and companies in Mexico to continue producing for the NAFTA market.
The automotive and auto parts industry in Mexico is very dynamic. Domestic consumption is decreasing but export activity is robust. Brazil is also helping exports grow. Since the Brazilian economy is expanding, we are exporting more to the country. Moreover, in March 2019, Mexico and Brazil launched a free trade agreement, which boosted our commercial relationship. Although demand from Brazil will not equal that in the US, it will help us boost our exports.
Q: What main threats could hamper the growth of the Mexican auto parts industry?
A: A main risk is the availability of qualified labor, which includes blue-collar workers, technicians and engineers. Some parts of the country are practically saturated but other areas have no space to continue growing. Migration toward industrial areas is not ideal because it generates social problems. The ideal solution would be for the industry to move toward cities with workforce availability. This is something the government needs to promote through federal policies.
Another aspect that limits growth is job security. The new Federal Labor Law establishes significant changes in the employer-employee relationship and both sides need to learn how to best work together. This change is necessary and mandatory, not only because of USMCA but also because of Mexico’s commitment to the International Labor Organization.
Q: What impact could USMCA have on Mexico’s quality and quantity of available labor?
A: We are starting to work with SE and the Ministry of Public Education to ensure academic plans in CONALEP and regional technical schools have a wider reach and better quality. We want these centers to emulate what is taught in the technology schools of world-class manufacturing hubs like Detroit, Germany, France, Korea and Japan. We are not worried about quantity as we are about the quality of our graduates. Today, we have a significant number of 15-20-year-old youngsters entering specialized technical schools, so we need to take advantage of this volume of human resources and train them appropriately.
Q: How are INA and its members working to comply with new local content standards established in USMCA?
A: These new standards will benefit auto parts producers across North America. Companies that use components that are imported from outside the region will have to find a way to buy them or produce them locally. This will surely lead to investments in all three countries. This will be a gradual process and Mexico could use it to attract more FDI. Still, we need political and investment security and a robust implementation of USMCA.
At Mexico Automotive Summit 2019, Alberto Bustamante, Director of Foreign Commerce at INA, will address the challenges and opportunities that auto parts companies based in Mexico will face to comply with USMCA’s new trade regulations. Register now to find out more.