Seminar: Perspectivs of the automotive industry in Mexico - INA A.C.

 

During our 5th Anniversary Open House event we had the presentation of the seminar "Perspectives of the automotive industry in Mexico in view of the USMCA (T-MEC)", presented by Mr. Oscar Albín, president of the 'National Association of Autoparts Industry' (INA A.C. 'Industria Nacional de Autopartes A.C.'), who represent the interests of the automotive manufacturing industry in Mexico to the Mexican government agencies and international entities. Following we provide a summary of the presentation given by Ing. Albín:

Currently the production of vehicles in the world is a total of more than 98 million cars produced in different areas and regions of the planet.

In particual during the period between 1997-2014, vehicle production in developing countries has increased exponentially; as is the case in Mexico, which has concluded the year 2018 with a total of 3,743,863 vehicles produced. And the forecast towards the end of 2019 is around 4 million vehicles. While in the same period of time the automotive production of the United States, Western Europe, Japan and South Korea has remained practically fixed since 1997.

El consumo interno de los vehículos producidos en México llega apenas al 22% de la producción total; resultando destacable el 88% restante, que implica las exportaciones de la producción nacional. Éstas exportaciones, que en su mayoría son absorbidas por el mercado interno de Estados Unidos, da como resultado que México es el 6to. mayor productor de vehículos y el 4to. mayor exportador a nivel mundial.

The internal consumption of vehicles produced in Mexico reaches only 22% of total production; the remarkable remaining 88% implies exports of national production. These exports, which are mostly absorbed by the US domestic market, result in Mexico being the 6th. largest producer of vehicles and the 4th. largest exporter worldwide.

Derechos reservados INA A.C. - Cortesía del Ing. Oscar Albín

Why are the main actors still interested in Mexico?

Mexico is located betwee the 2 main oceans and in the middle of the American continent, which directly links it with the rest of the world. Geographically, Mexico is a strategic area for logistics and distribution in North America, South America and Central America. In addition to being 1 ocean away from other areas with the highest consumption of vehicles.

Actualmente en México se han instalado alrededor de 600 proveedores Tier-1, empresas que directamente proveen a las armadoras de coches y les facilitan obtener contenidos regionales. Cumpliendo así con las reglas del tratado de libre comercio de América del norte, actualmente llamado TLCAN.

México cuenta con 13 diferentes tratados de libre comercio, los que liberan el comercio internacional con 52 países. Lo que actualmente facilita generar un total de 79,000 millones de auto partes; y más de 82,000 millones de dólares de ganancia en el balance comercial al cierre del año 2018.

Currently, around 600 Tier-1 suppliers have been installed in Mexico, companies that directly provide car assembly companies and facilitate for them to obtain regional pruducts, thus complying with the rules of the North American free trade agreement, currently called NAFTA.

Mexico has 13 different free trade agreements, which create tax-free international trade with 52 countries, which currently facilitates generating a total of 79,000 million auto parts; and more than 82,000 million dollars in profit on the trade balance at the end of 2018.

Derechos reservados INA A.C. - Cortesía del Ing. Oscar Albín

Mexico will not reach five million cars in 2025

El pronóstico para el desarrollo de la industria automotriz en México es prometedor; aunque sugiere alti-bajos estacionales, pues la apuesta hacia el año 2025 es poder llegar a producir un total de 4,255,453 vehículos.  Una vez que inicie operaciones la planta de Toyota en Guanajuato para finales del 2019, la producción de vehículos en México ascenderá a poco más de 4.07 millones de unidades.

Aunque se debe considerar que la capacidad de producción ya instalada por las diferentes plantas armadoras en México es de 5.3 millones de vehículos, lo que podría alterar positivamente el volumen de producción en cualquier momento, dependiendo de las circunstancias económicas y políticas globales.

La principal razón por la que las armadoras mexicanas no llegarían a los 5 millones de unidades es que el mercado norteamericano pide modelos SUV y pickups, pero en México la mayoría de las armadoras producen vehículos tipo sedán. Hay muchas marcas que por temas de mercado trabajan a muy baja capacidad de producción, como es el ejemplo de Ford, que produce 241,377 vehículos, entre modelos como sus sedanes Fusion y Fiesta. En total, la armadora estadounidense tiene una capacidad instalada de 492 mil unidades.

The forecast for the development of the automotive industry in Mexico is promising; although it suggests seasonal highs-lows, since the bet towards the year 2025 is to be able to produce a total of 4,255,453 vehicles. Once the Toyota plant in Guanajuato begins operations by the end of 2019, the production of vehicles in Mexico will amount to just over 4.07 million units.

Although it should be considered that the production capacity already installed by the different assembly plants in Mexico is 5.3 million vehicles, which could positively alter the volume of production at any time, depending on the global economic and political circumstances.

The main reason why Mexican shipowners would not reach 5 million units is that the US market asks for SUV models and pickups, but in Mexico most shipowners produce sedan-type vehicles. There are many brands that, due to market issues, work at very low production capacity, such as Ford, which produces 241,377 vehicles, including models such as its Fusion and Fiesta sedans. In total, the US ship owner has an installed capacity of 492 thousand units.

Investments in auto parts await ratification of the USMCA (T-MEC) to reach Mexico 

For the auto-parts manufacturing industry, the forecast is positive, since by 2021 its growth is estimated at 11%, comparing the year 2018 with 2021. Achieving a total of 94,000 million dollars produced during 2018 , to a possible 105 billion dollars produced by 2021

Derechos reservados INA A.C. - Cortesía del Ing. Oscar Albín

The current network of auto-parts manufacturers located in Mexico complements the Mexican production chain. And the countries of origin of these autoparts manufacturing companies have a predominance of origin from the United States (18%) and Japan (17%), although many other investments of varied origins are installed.

Derechos reservados INA A.C. - Cortesía del Ing. Oscar Albín

En la zona del bajío se concentra el 29,2% de la instalación de empresas fabricantes de auto partes, lo que sugiere una preferencia geográfica por la zona y sus facilidades para hacer negocios. Y en segundo lugar con un 19.2% del total de las empresas que proveen a la industria automotriz se encuentra el estado de Coahuila, en el norte del país.

Derechos reservados INA A.C. - Cortesía del Ing. Oscar Albín

Derechos reservados INA A.C. - Cortesía del Ing. Oscar Albín

NAFTA asked car manufacturers to incorporate 62.5% of regional content in their cars so that they could be imported duty-free. But the new USMCA (T-MEC) agreement will gradually raise the bar to 75% by 2023, which will encourage car manufacturers to increase the amount of regionally manufactured auto parts in cars and trucks they manufacture in North America.

There are assembly factories, mainly Asian and German, which, in order to reach 75% from the current 62.5%, must make investments of between 300 and 500 million dollars; This represents a clear opportunity for Mexico to attract these investments and increase the production of auto parts. According to calculations of the National Auto Parts Industry, the value of auto parts production, which this year will be 100 billion dollars, could increase by 10 billion dollars if these investments are made.