Mexico: OEMs advance plans to increase production, consider diversifying export destinations
Annual production capacity tops 4 million vehicles, 3.47 million vehicles produced in 2016
2017/10/10
- Summary
- Market size: 3.47 million vehicles produced, 80% export ratio, 1.6 million vehicles sold domestically, imports account for more than 50%
- More than 80% of exported vehicles destined for North America, market share of vehicles produced in Mexico increasing in the U.S. market
- Annual production capacity exceeds 4 million units, production at new plants adds capacity for 600,000 units
- Domestic market: Vehicle sales growth stalls, sales ratio of compact vehicles at over 60%
- Renault-Nissan: Producing Infiniti and Mercedes-Benz models at joint venture plant with Daimler
- GM: Expanding production and export of its compact Equinox SUV
- FCA: Export base for the Jeep Compass compact SUV
- VW: Increased production and export of the Tiguan compact SUV
- Ford: Cancelled construction of its new compact vehicle plant, increased production of powertrains
- LMC Automotive production forecast: Mexican light vehicle production will exceed 4.5 million units in 2020
Summary
According to the Mexican Auto Industry Association (AMIA), in 2016 3.466 million vehicles were manufactured for year-over-year (y/y) growth of 2.0%, and exports increased by 0.3% to 2.768 million vehicles for an 80% export ratio. 77% of exports were destined for the U.S. alone, and 86% were for North America, including Canada. New vehicles sales in 2016 saw y/y growth of 18.6% to 1.604 million vehicles, and imports comprised over 50% of this figure. From January to June 2017, vehicle production saw y/y growth of 12.6% to 1.884 million vehicles, and exports grew 14% to 1.513 million vehicles. Vehicle sales also continued to grow, albeit at a slower rate than the previous year, with y/y growth of only 2.9% to 743,051 vehicles.
In Mexico, Nissan and GM have three vehicle assembly plants, whereas FCA, Ford, and Honda operate two each, respectively. Audi and Kia's Mexican plants came on stream in 2016. The combined total annual production capacity of major plants exceeds 4 million vehicles. Renault - Nissan and Daimler's joint venture plant is scheduled to come on stream by the end of 2017; BMW's first plant in Mexico is scheduled for 2019; and a new Toyota plant is scheduled for 2020. Together, these will increase total production capacity by roughly 600,000 vehicles. Major automakers locally produce compact cars and pickup trucks, which have strong demand in the Mexican market, while also exporting these vehicles to North America and Latin America. In recent years, various OEMs have released new SUVs, such as the Nissan Kicks, Chevrolet Equinox, Jeep Compass, and VW Tiguan. Not only are these vehicles produced and sold domestically in Mexico, they are also supplied to the global market.
Mexico has attracted foreign investment, based on anticipation for its high potential domestic demand, and taken advantage of being a part of the North American Free Trade Agreement (NAFTA), which enables it to export products to the U.S. tariff free. In the midst of these positive trends for Mexican production and exports, the Trump administration was inaugurated in January 2017. President Trump has promised to enact various economic trade policies such as reducing the trade deficit; renegotiating NAFTA; abandoning the Trans-Pacific Partnership (TPP) Agreement; and placing a border tax on products imported to the U.S.As a result, the future of the Mexican automobile industry, which is heavily reliant on exports to the U.S., is unclear. Discussions for the renegotiation of the NAFTA began in August 2017, but discussions to revise the rules of origin, which widely differ among countries, are expected to be difficult.
At the same time, Mexico is negotiating with various countries in order to diversify its export destinations and make its economy less reliant on the U.S. Mexico has already signed free trade agreements (FTA) with more than 40 countries and regions, and will continue to negotiate and sign agreements to develop markets. At the beginning of 2017, Ford announced the cancellation of the construction of its new plant in Mexico, while other OEMs announced they would increase investment in the U.S. and continue operations in Mexico. Various automakers intend to carry out their Mexican operations as planned.
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| Source: Created based on AMIA documents | |
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