Mexican car and truck exports account for a significant percentage of country’s total overseas sales

Mexican car and truck exports and the highly developed industry that generates them are central to the country’s economy.

Even though the US has made some major announcements lately as to the growth of the automotive industry inside of its borders, Mexico has won nine out of twelve new automotive sector projects in the industry that have been announced since 2011.  Mexican car and truck exports are vitally important to the country’s economy.

At the end of 2015, the Mexican automotive industry was the source of almost 900,000 salaried positions.  Trucks and vehicles were manufactured by ten percent of these employees, while the remaining workers produced the remainder in auto parts.  Mexico has assumed the position of the seventh largest producer of vehicles in North America, and is, by far, Latin America’s leading producer of cars and trucks. In terms of export sales, Mexico is the world’s fourth-largest seller of vehicles.  Germany, Japan, and South Korea export more.  Seventy percent of Mexican car and truck exports are absorbed by buyers in the United States.  This makes the country the 2nd largest supplier of cars and trucks to the US market.  Only Canada sells the US more.

Automotive industry manufacturers in Mexico exported a total value of US $55 billion in motor vehicles during 2016, This is a number that accounted for fifteen percent of the country’s overseas sales.  Since the signing of the NAFTA in 1996, sales of Mexican car and truck exports have multiplied eleven times, and have grown by a median average of eleven percent annually. In 2016, Mexico exported 2.7 million cars in total to the Brazil, Canada, Europe, Colombia, Argentina, Asia, Chile, and the United States.

The top markets for Mexican automotive exports to the United States are comprised of eight entities.  These include: Texas, California, Alaska, Arizona, Connecticut Utah, New Mexico, and Rhode Island. The southernmost NAFTA partner is also the second largest exporter of auto parts and motor vehicles to twenty-six other jurisdictions in the US.

In 2016, the principal producers of Mexican vehicle exports were: Volkswagen, Ford Motor, General Motors, Nissan, and Fiat Chrysler.

Consumers may pay higher prices

Regrettably, in the current North American Free Trade Agreement renegotiation environment, Mexico’s auto exports are at risk. The price of Mexican car and truck exports may be affected by the demands being made by the United States’ parties to the talks.   Because most of Mexico’s 2016 US $52 billion trade surplus with the United States is made up of Mexican vehicle exports, the Trump administration is seeking to alter the guidelines under which the North American auto manufacturers operate.  At present, the rules of origin for the automotive industry in North America specify that to be considered as being “originating,” 62.5% of the value of a car or truck must be manufactured of parts made in the US, Canada and Mexico.  The Trump administration is looking to have this number raised to 85%.  The administration of Donald J. Trump believes that, in addition to lowering the trade deficit, the US will add much needed automotive industry jobs to its economy.  However, it is just about for certain that raising the percentage threshold for rules of origin will result in elevated manufacturing costs.  This will result in a higher price for buyers, as well as will make Mexican car and truck exports less competitive vis a vis competition from the Far East.

The parties to the NAFTA have announced that talks will continue into next year, given the fact that no agreement has been reached at the close of the recently ended fourth round of talks.

The proposed United States requirement to raise the North American Free Trade Agreement (NAFTA) zone content for trucks, cars and accompanying engines to eighty-five percent from the current 62.5 percent, represents a serious challenge for Mexico. The price of cars and trucks would inevitably increase because Mexico does not yet possess the domestic capability or tools to manufacturer many types of auto parts in the country. Furthermore, in the mid-term, the negative effect of raised tariffs and reduced exports would limit the number of new foreign investments and job generation in the automotive sector.

It is important to note that twenty percent of cars produced in the NAFTA zone are assembled in Mexico. Pickup trucks, like the Chevrolet Silverado and some versions of Fiat Chrysler’s Ram and are two of the largest selling Mexican car and truck exports to the US. In this regard, the possibility of raising the US import tariff from zero to thirty-five translates into a significant risk to sales in the United States’ domestic market. The thirty-five percent duty figure is that which has been established by the World Trade Organization as a part of its Most Favored Nation (MFN) program.

Mexican vehicle exports will be a topic of Mexico Now’s Automotive Summit

Mexican vehicle exports, as well as other automotive industry topics, will be the focus of a yearly event this coming December 6-7, 2017 in Leon, Guanajuato.  The Mexico Auto Industry Summit, organized by Mexico Now Magazine, will be held at the Poliforum in that city.

Mexico Now’s Automotive Summit will provide:

• An examination of the business dynamics of the country’s main OEMs and auto parts manufacturers, as well as a demand forecast;
• Manufacturing options, structures, and detailed costs;
• A look at Mexican automotive exports markets;
• A review of labor productivity and competitiveness benchmarks;

Additionally, attendees at the event will:

• Objectively analyze business conditions of Mexico’s auto and auto parts industries;
• Interact with Mexico’s OEM representatives and auto part producers’ plant managers;
• Develop an itemized pro-forma of a potential near-shore manufacturing project in Mexico;
• Obtain detailed and privileged information on Mexico’s automotive industry;
• Interact with Mexico’s OEM representatives and auto part producers’ plant managers;
• Hear from industry experts about the opportunities to participate in the Mexican automotive industry panel discussions;
• Examine current and future regional auto clusters;
• Make a comparison of Mexico’s automotive industry with that of those found in the US & China;
• Review legal and tax aspects of the auto industry in Mexico.