In Mexico, VW and Nissan producing new models; Ford producing the Fiesta;
Chrysler manufacturing the Fiat 500 Major auto manufacturers producing more compact cars: Mexico's annual production capacity to reach 2.85 million-level in mid 2010
Major auto manufacturers' annual production capacity to reach 2.85 million level in 2010...
Ford converts F-Series plant into passenger-car plant, starts production of the Fiesta destined...
GM started producing the Aveo, destined for the global market, and automatic transmissions...
European auto manufacturers in Mexico: VW launches new model, Fiat produces Fiat 500...
Japanese auto manufacturers in Mexico: Nissan to produce new vehicle model, Isuzu and...
Collaborative report with IHS Global Insight
Mid-term Production Forecast
In 2009, Mexico saw new vehicle sales drop for the third year straight. Sales were down by 270,000 units over those of the previous year, for a total of 755,000 sold. In addition, vehicle production fell overall by 595,000 units for the year, with vehicle export volume down by as much as 438,000 units. In total, 1,508,000 units were produced in Mexico during 2009. According to the Mexican Association of Automotive Industry (AMIA), out of the total production volume destined for export, the volume destined to the USA (a market that accounts for 70% of the total) declined by 297,000 units; and production volume destined to Europe, which accounts for 10% of the total volume, fell by 87,000 units.
The AMIA forecasts that new vehicle sales will slowly recover in 2010. (In August 2009, the Mexican government introduced purchase incentives, encouraging consumers to buy new vehicles.) Export volume has been on the road to recovery starting at the end of 2009. In January 2010, production volume and export volume both doubled year on year.
Five major auto manufacturers in Mexico have been expanding their production operations in the compact-car sector, eying the export market. VW and Nissan are planning to produce new vehicle models, Ford plans to produce its Fiesta, and Chrysler is planning to produce the Fiat 500. GM already started producing the Aveo in 2008 and the automatic transmissions used in the Aveo, in 2009.
Mexico's annual production capacity will be in the range of 2.85 million units in the middle of 2010. Ford expanded its plant in order to produce the Fiesta. VW is also expanding its plant to manufacture new vehicles models. In the heavy- and medium-duty commercial vehicle sector, Daimler, Isuzu, and Hino all commenced production operations at their new plants.
■Mexico: recent developments in light vehicle production by five major auto manufacturers
|GM||In July 2008, GM started producing the Chevrolet Aveo (code name: T250) at its new plant. It sells it in Mexico and also exports it to the US and Canada. It plans to boost the production capacity of its new plant to 300,000 units a year in the future. The new plant is capable of producing 160,000 a year for the time being. The company will produce the next-generation Aveo (code name: T300), which it is currently developing, in the US.|
|Ford||In March 2010, Ford is planning to start producing the Ford Fiesta and sell it in North and South America. As a result, it converted the commercial vehicle production line at its Cuautitlan plant into a passenger car production line and boosted the production capacity from 66,000 units to 324,000 a year.|
|Chrysler||Chrysler will begin producing the Fiat 500 by the end of 2010, planning to produce more than 100,000 a year. The company will sell it in North and South America. It doesn't have any plans at the moment to boost the overall production capacity of the plant. The engines to be used on the Fiat 500 will be supplied from the US.|
|VW||VW plans to produce a new vehicle model, which within the company is being called the New Compact Sedan. Production will start in the middle of 2010. VW will export this vehicle to all of the global markets. As a result of this development, the company will boost the annual production capacity of its Puebla plant by 100,000.|
|Nissan||In 2011, Nissan plans to start producing a new vehicle model, the successor to the March. It will sell it in Central and South America and in the US. It will initially produce 100,000 a year, planning to increase the production volume to 200,000 a year in the future. (However, Nissan isn't planning on increasing the overall production capacity of the plant).|
|■Mexico: automobile production volume, domestic sales volume, export volume||(units)|
|2005||2006||2007||2008||2009||Jan. 2009||Jan. 2010|
|2005||2006||2007||2008||2009||Jan. 2009||Jan. 2010|
|Source: AMIA (Asociacion Mexicana de la Industria Automotriz, A.C.)|
|(Notes) 1.||Light commercial vehicles are included in the above data, but medium- and heavy-duty trucks and buses are not.|
|2.||Nissan's production volume includes Renault brand vehicles.|
|3.||Chrysler closed its North America plants, including those in Mexico, for two months after it filed for bankruptcy on May 1st, 2009. The Toluca plant and the Saltillo plant resumed production in June 29 and July 6, respectively.|
|4.||Domestic sales by brand are shown at the end of this report.|
■In August 2009, the Mexican government initiated purchase incentives to encourage new-car sales
|In July 2009, the Mexican government announced a program to encourage new-car sales. The incentive plan provides 15,000 pesos (approximately 100,000 JPY) to buyers who purchase new vehicles made in Mexico and scrap vehicles that are ten years and older. The total budget for the program is 500 million pesos, which is the equivalent to 33,333 vehicles. The government is providing the subsidy to the auto manufacturers, who in turn discount the price of new vehicles to buyers by the amount of the subsidy.|
|However, since there were fewer buyers than expected, the government dropped the "10 year or older" requirement in October 2009, and expanded the program to include customers who scrap imported cars and buy new vehicles. In addition, the program initially required buyers to complete the procedures for scrapping their older vehicles first, but this requirement was also dropped.|
■Major auto manufacturers' annual production capacity to reach 2.85 million level in 2010; Chinese auto manufacturers postpone expansion projects
As of February 2010, the combined annual production capacity of major auto manufacturers was 2.75 million. During the last one year, Ford converted its light truck production line at the Cuautitlan plant into a passenger car production line, boosting the annual production capacity to 258,000. In addition, new trucks have been started to be produced by Daimler at its new plant in Saltillo, by Isuzu at its new plant in Cuautitlan, and by Hino at its new plant in Silao.
VW will boost the annual production capacity of its Puebla plant by 100,000 in the middle of 2010. As a result, the combined production capacity of major auto manufacturers is forecast to reach a level of 2.85 million a year. As a note of reference, the FAW Group and the Changan Automobile Group, both based in China, postponed constructing plants.
■Mexico: Major auto manufacturers production facilities
|General Motors de Mexico,
S. de R.L. de C.V.
|Silao||245||Chevrolet Silverado, Avalanche,
GMC Sierra, Cadillac Escalade
|Ramos Arizpe||240||Chevy C2 (former Corsa),
Chevrolet HHR, Captiva Sport
|San Luis Potosi||160||Chevrolet Aveo/Pontiac G3|
|Ford Motor Company,
S.A. de C.V.
|Cuautitlan||324||Ford Fiesta (starting in March 2010)
(Production of F-Series is discontinued)
|Hermosillo||300||Ford Fusion, Mercury Milan,Lincoln MKZ|
|Chrysler de Mexico,
S.A. de C.V.
|Toluca||180||Chrysler PT Cruiser, Dodge Journey|
|Volkswagen de Mexico,
S.A. de C.V.
|Puebla||450→550||VW New Beetle, Jetta/Bora,
Heavy/Medium Trucks, Buses
|Blue Diamond Truck
|Escobedo||28||International/Ford Medium Trucks (These
medium trucks are produced at Navistar's plant)
S.de R. L. de C.V.
|30||Freightliner Heavy/Medium Trucks|
S.A. de C.V.
|Aguascalientes||350||Nissan Sentra, Versa (Tiida),
Nissan Platina/Renault Clio
|Cuernavaca||140||Nissan Pickup, Tsuru, Versa (Tiida)|
|Honda de Mexico,
S.A. de C.V.
|El Salto||50||Honda CR-V|
|Toyota Motor Mfg. de Baja
California S. de R.L. de C.V.
|Hino Motors Manufacturing
Mexico, S.A. de C.V.
|Silao||1||Hino 500 series (Ranger)|
|Isuzu Motor de Mexico
S. de R. L.
|(China FAW Group)||Michoacan||(0→100)||The company cancels the plan
(Production of FAW brand vehicles)
|(Changan Automobile Group)||n.a.||(0→50)||The company postpones the plan
(Production of Chana brand vehicles)
|The total annual production capacity will grow from 2.75 Million, to 2.85 million.
(The plans announced by two Chinese companies initially have not been included.)
|(Notes) 1.||Isuzu's Cuautitlan Plant plans to initially have an annual production of 600 vehicles.|
|2.||The China FAW Group had planned to start joint production (100,000 units a year) with Grupo Salinas, which is based in Mexico. However, Grupo Salinas announced in June that the project had been canceled based on the fact that the China FAW Group hasn't much brand recognition in the North American market, which itself is shrinking. Nevertheless, Grupo Salinas will continue to import and sell China FAW brand vehicles for the time being.|
|3.||Changan Automobile Group, which is based in China, had planned to jointly produce about 50,000 units a year with Grupo Hispanoamericano Autopark, a company based in Mexico. However, the Changan Automobile Group announced in November 2009 that it postponed this project because of sluggish demand due to the financial crisis.|
■Ford converts F-Series plant into passenger-car plant, starts production of the Fiesta destined to the global market
Ford converted its Cuautitlan plant from an F-Series Pickup plant into a passenger car plant. The company plans to start commercial production of the Fiesta at the plant in March 2010. The converted plant is capable of producing 324,000 units a year. The Fiesta, which is being manufactured also in Europe, China, and Thailand, is being marketed worldwide. The company plans to export it not only to North but also to South America.
In November 2009, the company officially commenced operations at its new plant in Chihuahua designed to produce diesel-powered engines. The plant produces a new diesel-powered engine that Ford developed for the first time in North America. It is exporting it to plants in the US producing the F-Series.
■Ford discontinued producing the F-Series at its Cuautitlan plant, switching to producing the Fiesta, a compact passenger car
|Ford converted the F-250 and 350 production lines at its Cuautitlan plant into production lines capable of producing the Fiesta, a compact passenger car. The company expects to begin commercial production of the Fiesta, which it mainly will export to North and South America, in March 2010. It plans to produce 180,000 in 2010. The annual production capacity at the Cuautitlan plant is expected to reach 324,000 units a year in the future.|
|(Note)||The Fiesta being produced in Mexico is the 6th generation model and is built on the same platform as the Mazda Demio. In August 2008, Ford began producing the Fiesta in Germany, which is also being produced in Spain and China. The company plans to manufacture it also at its new plant in Thailand.|
|In November 2009, Ford started operations at the second plant at its Chihuahua plant site. The new plant is capable of producing 200,000 units a year. The engines will be supplied to the 2011-model-year F-250, F-350, F-450, and F-550, which the Kentucky Truck plant will begin producing in the spring of 2010. (The F-Series currently uses Navistar's diesel-powered engines.)|
|The second engine plant manufactures a new 6.7L V8 diesel-powered engine, which goes by the code name "Scorpion". Ford developed this new engine, which is the first one designed exclusively for pickups. It is believed to be better than the current Navistar 6.4L V8 diesel powered engine in terms of torque, output, and fuel efficiency. Incidentally, the first plant, which is capable of producing 428,000 engines a year, produces a 4-cylinder gasoline engine.|
|In June 2009, Navistar International acquired 24% of the stock in Blue Diamond Truck, which was held by Ford, turning it into a subsidiary. Blue Diamond Truck was established in 2001, with Navistar investing 51% and Ford the remaining 49%. Blue Diamond supplies Ford with the Ford 650 and 750 medium-duty trucks, which use International's truck platform and come with either a Cummins or Caterpillar diesel-powered engine.|
|(Notes) 1.||Ford, which hadn't been producing diesel-powered engines in North America, had been procuring them from Navistar International on an OEM basis since 1982. The engines were for use on the F-Series. (The latest OEM agreement was through 2012.)|
|2.||However, because Ford wants to use its own diesel-powered engine in the F-Series, Navistar filed a complaint in June 2007, accusing Ford of breaching the contract. In addition, Blue Diamond Truck announced that it will go out of business at the end of September 2009.|
|3.||In January 2009, Ford and Navistar agreed on an out-of-court settlement under which Navistar will stop supplying its diesel-powered engines to Ford at the end of 2009, and Blue Diamond Truck will stay in business, changing its structure, as Navistar takes more than half the stake in the company.|
■GM started producing the Aveo, destined for the global market, and automatic transmissions, at new plant in San Luis Potosi
GM started producing the Chevrolet Aveo at its new plant in San Luis Potosi in July 2008. Then in August 2009 at the same new plant, it started producing the automatic transmissions (ATs) being mounted on the Aveo.
The Aveo is being marketed worldwide and was developed by GM-Daewoo. It is also under production in Korea, China, India, Thailand, and Poland. The new San Luis Potosi plant is capable of producing 160,000 units a year, but this number will grow to 300,000 in the future. In addition, the company plans to produce a successor to the Aveo, and that new vehicle is under development, in the US.
■GM started production of ATs at its new plant in San Luis Potosi
|In August 2009, GM started operations of an AT plant, which it had been building on the site of its new plant located in San Luis Potosi. The new plant is capable of producing 300,000 ATs a year. The ATs are used in the Chevrolet Aveo and Pontiac G3, which are manufactured at the San Luis Potosi plant.|
|(Notes) 1.||GM started operations at its new plant, in San Luis Potosi, in July 2008 and began commercial production of the Chevrolet Aveo in August. The new plant is capable of producing 160,000 a year, but this number will be raised to 300,000 in the future. The company is selling the vehicles as the Pontiac G3 in Mexico, as well as exporting them to the US and Canada.|
|2.||The Aveo (code name: T250) is based on the Daewoo Gentra. The North American models come with a 1.6L engine. GM started producing the Aveo in Korea in September 2005, but is also now manufacturing it in China, India, Thailand, and Poland. The company plans to produce the next-generation Aveo (code name: T300) at its Orion Township plant in Michigan, USA, starting in 2011.|
■European auto manufacturers in Mexico: VW launches new model, Fiat produces Fiat 500, and Daimler boosts production of heavy-duty trucks
■VW will start producing its new strategic model for the global market in the middle of 2010
In the middle of 2010, VW will start producing a new model (currently being called the New Compact Sedan in-house), which it will export globally. The company is currently expanding its Puebla plant in order to boost its annual production capacity by 100,000.
■VW expands Mexican plant, plans to start producing a new model for export in the middle of 2010
|VW is currently developing a new model, the New Compact Sedan (as it is currently being called in-house), which it will produce at its Puebla plant in order to export it on a global basis. It plans to start production in the middle of 2010.|
|Between 2008 and 2010, VW has been making an investment of USD $1 billion in its business in Mexico. Among the allotted amount of investment, USD $410 million will be spent on setting up a production line for a new vehicle model and on expanding the stamping and painting plants at the Puebla plant. The rest will be used to upgrade existing production lines and develop other new models.|
|After the expansion project is completed, the production capacity of the Puebla plant will be increased from the current 1,800 a day to 2,100 a day. In addition, the company plans to increase the North and South American local-content ratio of the new model, increasing the ratio from 60% for the current model, to 90% for the new model.|
■Fiat/Chrysler plans to produce the Fiat 500 for export to North and South America
Fiat/Chrysler plans to start producing the Fiat 500, which it will export to North and South America, at its Toluca plant by the end of 2010. The company plans to import the engines to be used in the 500 from the US.
■Chrysler to produce Fiat 500 at Toluca plant, producing more than 100,000 a year
|Fiat/Chrysler is planning to produce the Fiat 500 in Mexico. The company will begin producing the 500 at its Toluca plant at the earliest by the end of 2010. It plans to manufacture more than 100,000 a year, exporting it to the US, Canada, and South America.|
|The company plans to produce Fiat's 4-cylidner, 1.4L FIRE engine at Chrysler's Global Engine Manufacturing Alliance plant in Dundee, Michigan, USA starting in the fourth quarter of 2010. This engine will be mounted on the Fiat 500, as announced in December 2009.|
|Sources: Chrysler News Release (December 17, 2009), etc.|
|(Notes) 1.||Chrysler's Toluca plant produces the PT Cruiser and Dodge Journey. The company had planned to terminate production of the PT Cruiser in the summer of 2009, but in August 2009, the "New Chrysler" announced that it would still continue producing it until the second half of 2010.|
|2.||The Fiat 500 shares the same platform as that with the Panda. Production of the Fiat 500 began at Fiat's plant in Poland in May 2007. In Mexico, the company has been importing and selling the 500 since September 2008.|
■Daimler started operations at its new plant producing Freightliner-brand trucks
In February 2009, Daimler started operations at its new plant located in Saltillo. The plant, which is Daimler's second in Mexico, produces Freightliner-brand trucks.
■Daimler began producing Freightliner-brand heavy-duty trucks at its new plant
|In February 2009, Daimler started operations at its new plant in Saltillo. The new plant, which is its second plant, produces Freightliner Cascade Class 8 heavy-duty trucks for sale in the US, Canada, and Mexico. The plant is capable of producing 30,000 a year.|
■Japanese auto manufacturers in Mexico: Nissan to produce new vehicle model, Isuzu and Hino started producing medium-duty trucks at their new plants
■Nissan: plans to produce new successor to the March in 2011, will export it to the US
Nissan plans to start producing a successor to the March/Micra in 2011 in Mexico. The successor model will be marketed globally and also manufactured in Thailand, India, and China. The company's plant in Mexico will export it to Central and South America, and the US.
■Nissan to produce successor to the March starting in 2011
|In Mexico, Nissan will start producing a low-priced car, which will be marketed on a global basis, at its plant in Aguascalientes in 2011. It plans to produce 100,000 a year at first, but will increase the number to over 200,000 in the future. However, the company will not boost the overall annual production capacity of the plant. The new vehicle will be a successor to the March/Micra. The company will start producing it over time, beginning in the spring of 2010, at plants located in Thailand, India, and China. The sticker price will be approximately USD $10,000.|
|The successor of the March uses 20% fewer parts than the current March. The company plans to lower the cost by increasing the local-content ratio to about 90% at each of its plants. It will export the successor manufactured in Mexico to Central/South America as well as to the US.|
|(Note)||In August 2009, Nissan and Chrysler called off an agreement they signed in August 2008 under which they would supply each other completed vehicles on an OEM basis. One of the terms of the agreement was for Nissan to produce a model based on the Tiida for Chrysler in Mexico. And then Chrysler was to sell it in South America.|
■Toyota: plans to produce Tacoma destined for the US, Tacoma's reduced production volume in US will not affect Mexican operations
Toyota has been producing the Tacoma designed for the North America market, in Mexico since the end of 2004. In March 2010, Toyota will not only change the production facility producing the Tacoma in the US but also reduce the vehicle's production volume. However, Toyota doesn't plan to make any changes to its production in Mexico.
■Toyota's reducing production volume of the Tacoma in the US will not affect its business in Mexico
|Toyota has been producing the Tacoma sold in the US and Canada, in Mexico, where it has an annual production capacity of 50,000. Toyota has been producing truck decks for the Tacoma that US-based NUMMI produces (annual production capacity of 160,000). Toyota, which will discontinue production at NUMMI in March 2010, will reduce the production capacity of the Tacoma to 100,000 a year, transferring production to Toyota Motor Manufacturing of Texas (TMMTX). This was announced in August 2009. The company says that its transferring production to Texas will not have any great impact on its business in Mexico.|
|(Note)||Toyota's Mexican plant started producing truck decks to be used in the Tacoma that US-based NUMMI produces, in September 2004. Also in the same year, the plant started producing the Tacoma in December. Toyota initially had also been considering producing passenger cars. The Mexican plant exports its entire Tacoma production volume to the US and Canada. The production capacity was increased from 30,000, to 50,000 a year in 2007.|
■Honda: with production capacity of 50,000 a year, exports the CR-V to North and South America
In September 2007, Honda switched from producing the Accord at its Mexican plant, to producing the CR-V. It exports it to North and South America. The production capacity is 50,000 a year.
■Honda exports CR-V to North and South America, makes minor model change at the end of 2009
|In September 2007, Honda switched from producing the Accord at its El Salto plant, to producing the CR-V. (Honda also produces the CR-V at its East Liberty plant in the US.) At the same time it started producing the CR-V, the company boosted its production capacity from 30,000 to 50,000 a year. It exports the CR-V to North and South America from Mexico. In 2009, the company made a minor change to the CR-V, which it manufactures in the US, in September; and to CR-V, which it produces in Mexico, in November.|
■Isuzu started producing the Elf; and Hino the Ranger, at new plants
Isuzu and Hino started producing medium-duty trucks at their respective new plants in Mexico; Isuzu in March 2009 and Hino in September. Isuzu plans to increase its production volume to more than 1,000 a year within two to three years. Hino's plant in Mexico is capable of producing 1,200 a year.
■Isuzu starts assembling the Elf, a medium-duty truck at its new plant
|In March 2009, Isuzu started assembling SKD kits of the Elf at a new plant at Isuzu Motor de Mexico (which is owned 100% by Isuzu), located in San Martin Obispo, Cuautitlan. The new plant, which is capable of producing 2,000 a year, is initially producing two units a day. It manufactures the GVW, which weighs 8.8 tons and is the heaviest medium-duty model in the Elf series. Within two to three years, the company plans to boost the production volume to four units a day, raising it to a level of more than 1,000 a year.|
■Hino began producing the Ranger, a medium-duty truck, at its new plant
|In September 2009, Hino started producing the Hino 500 series medium-duty trucks at a new plant of Hino Motor Manufacturing Mexico. The new plant is in Silao, Guanajuato. (This truck series is named the "Ranger" in Japan.) The company held a ceremony to commemorate the first model launched off the line, in October 2009. The new plant is capable of producing 1,200 a year. Hino entered the Mexican market in 2007 when it began importing and marketing the Hino 300 series light-duty truck, which is called the Dutro in Japan.|
|Sources: Hino News Release (October 15, 2009), etc.|
|(Note)||Hino Motor Manufacturing Mexico is owned 80% by Hino and 20% by Mitsui & Co., Ltd. It is Hino's second production facility in Latin America, following the one it has in Columbia, where it produces the 500 and 300 series. The 300 series, which it markets in Mexico, is imported from Japan.|
|■Mexico: New vehicle sales by brand (retail sales)||(units)|
|2005||2006||2007||2008||2009||Jan. 2009||Jan. 2010|
|(Note)||The data does not include sales of trucks and buses.
GM's figures are total of Chevrolet, Buick and Pontiac brands.
1. Data indicate figures of only small-size vehicles, including passenger cars and light commercial vehicles with a gross vehicle weight of under 6 tons. Trucks and buses in the segment of larger than medium-size vehicles are not included.
2. Figures for 2008 and 2009 indicate actual production results.
3. All rights reserved. Reproduction of any data will require permission of IHS Global Insight.
IHS Global Insight Report (Released in January 2010)
Mexico: Industry and Production Outlook - Light Vehicles
Outlook for Light-Vehicle Production
While production in Canada and the United States dropped to decades-long lows in 2009, Mexico's 2009 output only hit a five-year low. Production dropped 28.2% to 1.497 million units from 2008's 2.085 million (which was also Mexico's highest production year). That figure was the lowest since 1.489 million units were produced in 2004. Nevertheless, also unlike Canada and the United States, production did not resume year-on-year (y/y) growth in the fourth-quarter of 2009. Fourth-quarter output declined 3.9% y/y to 499,575 units. The fourth-quarter downturn was due to shortfalls at General Motors and Volkswagen. Part of GM's decline was due to it ending production of Saturns at its Ramos Arizpe plant in the third quarter, and waning demand for the small vehicles built at its San Luis Potosi plant. Although Ford's overall production in Mexico increased y/y in the fourth quarter, the year-long closure of its Cuautitlan plant while it retools for the Fiesta small car also contributed to the negative comparison. Production will quickly turn around with a 52.4% y/y increase in the first quarter of 2010, and a 23.6% gain for the entire year to 1.851 million units. Annual growth will average 12% from 2011 through 2014.
Total Light-Vehicle Demand
Total Light-Vehicle Demand Outlook
Light-vehicle sales came in higher than anticipated in December, at 91,000 units. This allowed 2009 to finish with more than 753,000 units. Although this is a severe contraction compared with 2008, the silver lining is that the sales contraction has finally ended. Because 2009 came in modestly higher than our estimates, we have raised our 2010 outlook by some 20,000 units.
|Mexico Production Forecast by Calendar Year
|Mexico Production Forecast: Volume Difference from Prior Forecast
|Mexico Production Forecast by Quarter
|Mexico Production Forecast: Volume Difference from Prior Forecast
IHS Global Insight projects 2010 sales to reach 781,066 units, largely on account of a continually improving Mexican economy, which we expect will take off during the second quarter of the year. It is important to note that the recovery will be extremely slow. While the light-vehicle market could potentially be larger this year, based on economic variables alone, we remain concerned about the impact of income taxes and a sales tax hike, and how these will filter through to Mexico's vehicle industry. We expect light-vehicle sales to regain their pre-recession levels in 2015, reaching 1,030,811 units.
The pessimistic scenario contemplates Mexico's vehicle market stabilizing at closer to 700,000 units. This would be the result of higher sales and income taxes taking a larger toll on consumption than what is now expected. It also contemplates 2010 vehicle prices going up substantially across the board; we only know of two OEMs that adjust prices for NAFTA-imported vehicles due to a lower exchange rate.
On the optimistic side, should GDP growth become positive in the first quarter, we would expect that annual demand could reach 815,000 units. This would work in a two-step process: first, with economic recovery arriving earlier, then followed by a credit thaw for vehicle purchases.
In 2009, cars accounted for an estimated 58.3% of Mexico's light-vehicle market; this edges up to 58.9% in 2010. Cars will continue to dominate vehicle sales as more compact and subcompact offerings enter the market, including the new products from the Fiat/Chrysler alliance. The Nissan Micra will help to drive subcompact car sales to 30% of the total in 2014, also helped by the Chevy C2, the Tiida, and the Fiesta. The lower-middle car segment is being cannibalized by new subcompact, compact, and compact MPV offerings, and its share is expected to decline to from 10.9% in 2009 to 3.7% in 2015.
Truck growth is driven by the entry CUV, entry pickup, and full-size pickup segments, which are projected to be 8.3%, 6.5%, and 11.0% of the market, respectively, in 2010.
Nissan continues to dominate market share in Mexico. GM and VW are a close second and third, with Ford in the fourth spot. Over the next five years, we do not foresee much change in market position for these top-selling groups. Chinese automaker FAW will exit the Mexican market in calendar-year 2011, with Honda picking up the majority of its market share. Although most brands lost volume between 2008 and 2009, VW Group increased their market share.
After a rebound in the third quarter of 2009, which marked the end of the recession in Mexico, IHS Global Insight expects GDP growth rates to slow through the end of the first half of 2010, driven by slow/moderate growth of the U.S. economy. Mexico's GDP will continue to post positive growth rates in the last quarter of 2009 and 2010. Still, the economy will not return to pre-crisis levels until the end of 2011. Fiscal constraints, coupled with a slow recovery of the U.S. economy, will dominate the dynamics of economic growth in Mexico during 2010. At IHS Global Insight, we forecast the Mexican economy to grow 3.5% in 2010 after plunging 6.9% in 2009. The U.S. economy is expected to grow 2.6% in 2010.
IHS Global Insight forecasts annual inflation to remain around 4.0% in 2010. The central bank targets inflation at 3.0%, plus or minus 1 percentage point. We forecast yearend inflation for 2010 at 4.0%. The depreciation of the exchange rate is expected to put upward pressure on imported goods, but the overall effect of this, coupled with lower commodity prices, should yield a stable forecast in the upcoming quarters. Therefore, prices of imported goods will also remain stable, as inflation in major trading partners is expected to remain muted. The recession and lower demand will also be important factors that will help the central bank on its mission to maintain price stability.
Uncertainty regarding capital inflows persists. Foreign direct investment (FDI) decreased an estimated US$11.0 billion in 2009. The slowdown in the U.S. economy will take its toll on FDI in Mexico, as many of the projects attached to foreign investment in Mexico are aimed at exporting products to the U.S. market. FDI will return to Mexico in 2010, but IHS Global Insight does not forecast a catch-up of the forgone investment in 2009, since increasing drug-related violence will discourage some of the new ventures. We do not expect Mexico to face any external financial constraints in the short-to-medium term. In addition to its ability to attract foreign capital, it is well endowed with a sizeable stock of foreign-exchange reserves.