Mexico may surpass India by 2020 as the sixth largest vehicle producer globally, according to the Mexican Association of Automotive Industry. The automotive industry accounts for 18% of Mexico’s manufacturing sector and 3% of its national gross domestic product. Mexico’s auto parts industry is closely tied to its American counterpart and economic growth in the United States.
Q. How does the United States compare with Mexico in the automotive industry?
Martínez: The United States is the second largest light vehicle producer in the world, and while Mexico is the top producer in Latin America, it currently ranks as the seventh largest worldwide. Since the economic crisis in 2009, Mexico’s auto industry has shown steady growth from 2010 to 2015 and is expected to produce more than 5 million vehicles annually by 2020. Now, the Mexican industry’s immediate concern is satisfying the industry requirements for this increased production, including providing more technology, plastic parts, and metal. There are many opportunities for U.S. suppliers, and many are well-positioned to help meet this demand.
Q: How significant is the presence of automotive manufacturers in Mexico?
Martínez: There are currently 10 manufacturers in Mexico, and there will be 11 by the end of 2016. Current original equipment manufacturers (OEMs) include General Motors, FCA (Fiat-Chrysler), Ford, Nissan, Honda, Toyota, Volkswagen, Mazda, and Kia. This manufacturing base produces 42 brands and 500 models in 22 manufacturing plants and has a network of 1,800 dealers.
The new player, Kia, recently started producing vehicles in Pesquería, Nuevo León. Audi will start its Q5 vehicle production in late September 2016 in San José Chiapa, Puebla. In 2019, BMW will begin production at its first auto plant, which is located in San Luís Potosí. Other long-time players, Nissan and Daimler, have a joint venture agreement for Nissan to produce Mercedes and Infiniti vehicles in Mexico, starting in 2017. Toyota is building its first Mexican car plant in Guanajuato (the Tacoma pickup is already being built in Tijuana). Ford recently announced it will build a new plant in San Luíis Potosí to increase its Mexican vehicle production. BAIC, a Chinese brand, recently began selling cars in the Mexican market, and may set up a production facility next year in Mexico to possibly export to the United States and Latin American markets. Also, because there is such a large amount of vehicle production in Mexico, there are also many auto parts suppliers based in Mexico.
Q: What are some opportunities for U.S. automotive firms exporting to Mexico?
Martínez: U.S. exports of new vehicles are limited due to many of the same models also being produced in Mexico. There is no duty applied for U.S.-made vehicles and auto parts imported into Mexico due to the North American Free Trade Agreement. so there are good opportunities for U.S. companies to export to the tier supplier base, and to partner with Mexican distributors that sell parts to OEMs and the aftermarket.
Tier one suppliers sell directly to OEMs, while tier two suppliers sell directly to tier one suppliers, and tier two to tier three, etc. However, sometimes a firm may be a tier one supplier to one company and a tier two supplier to another company, or supply different tier levels with different products lines.
Q: What market opportunities exist for U.S. auto parts suppliers looking to sell to Mexico?
Martínez: According to U.S. Department of Commerce, U.S. auto parts sales to Mexico have grown from $17.5 billion in 2010 to $30 billion in 2015, an increase of more than 70%. Fifty-three percent of all auto parts imports into Mexico were from the United States last year. The Mexican auto parts market is estimated to be $122 billion in 2016. Opportunities include automotive parts sales to OEMs, tier suppliers and the aftermarket. Major Mexican imports of auto parts and their components include: components for harnesses, parts, stamped parts, accessories for bodies, engines, audio and video devices, seats for vehicles, air bags, automatic gearboxes, differential axles, clutches, and tires.
Some prime targets for U.S. auto parts suppliers looking to sell in Mexico are the U.S. auto producers, both directly and through Mexican suppliers. U.S. companies such as Ford, Chrysler and General Motors have a long historical footprint in Mexico and supply relationships with U.S. auto parts manufacturers.
Looking at the aftermarket, Mexico has 32 million vehicles nationwide and more than 50% of them are at least 10 years old. The Mexican market faces more international competition relative to other countries in Asia and Europe; however, the United States is still recognized as a source of quality trusted suppliers, offering a solid advantage versus the international competition.