Mexico: When The Car Industry Is An All-In

promo2 bayford parts 250913

Numbers are big: in 2013 car production reached a record of 2,933,465 units in Mexico, 82.1% of which were bound to foreign market. The country accounts for 3% of global car manufacturing and counting.

“It is a safe bet. Mexico is now one of the major global players in car manufacturing,” noted Mr Solís to potential investors. According to AMIA’s chairman, “by the end of 2013 the automotive sector generated $39 billion currency input, which makes it a boost for Mexican economy.”

By comparison, national oil industry current input is 30% less.

“We have gained momentum throughout the years,” Economy Secretary Ildefonso Guajardo said. “Now Mexico is attracting international attention because it has proven to have quality of production and a friendly investment climate.”

News on the car market in Mexico is indeed increasingly relevant. The last report, published last week, affects the sector globally – Mexico is on track to replace Japan as the second-largest exporter of cars to the United States by the end of the year. An $800 million Honda plant that opened in the central state of Guanajuato will produce about 200,000 Fit hatchbacks a year, helping push total Mexican car exports to the U.S. to 1.7 million in 2014, roughly 200,000 more than Japan, consulting firm IHS Automotive says. And, with another big plant starting next week, Mexico is expected to surpass Canada for the top spot by the end of 2015.

Mexico is currently the 8th global manufacturer, after Brazil, India, South Korea, Germany, Japan, United States and the undisputed king China. “In the case of Brazil, which is our closest competitor, it is manufacturing 400,000 vehicles more than us, but only the new Nissan plant will reach 500,000 units in four years,” Solís proudly stated. Becoming one of World’s Top Five is within reach. Nissan is producing in Aguascalientes, Volkswagen in Puebla, Mazda in Salamanca, Honda in Celaya and Audi in Puebla, among many others. All those are set to increase their production in the next future.

But what’s the downside? Critics point out that much of the draw for international manufacturers is Mexico’s low wages, which make manufacturing here cheaper than in many places in China, and have helped keep Mexico’s poverty rate between 40 and 50 percent of the population despite the passage of NAFTA.

“It’s one of the most modern industries that is generating the most money for the country,” said Huberto Juarez, an auto industry expert at the Autonomous University of Puebla to AP agency. “It’s not right that these workers are making so little.”

When NAFTA was signed 20 years ago, Mexico produced 6% of the cars built in North America. It now provides 19%. Total Mexican car production has risen 39% from 2007, to nearly 3 million cars a year. The total value of Mexico’s car exports surged from $40 billion to $70.6 billion over that span. Impressive figures that gives critics more ammunition. Despite successes such as the car-making boom, Mexico still isn’t creating nearly enough formal jobs for the hundreds of thousands of people entering the workforce each year.

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

Be the first to comment on "Mexico: When The Car Industry Is An All-In"

Leave a comment