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Mexico: Investment plans for near-shoring and EV shift
Production and sales recover in 2022; Tesla to build new plant for next-gen EVs
2023/04/24
- Summary
- Accelerated economic collaboration within North America against a backdrop of global supply chain restructuring
- Production situation in 2022: Year-over-year increase of 9.2% halts long-term slump, 87% of which was for export
- Tesla: Announces construction of plant in Mexico; Expectations for economic effects rise
- Sales in 2022: Sales recover for the second year in a row, with Chinese-made cars becoming the largest force among imported cars
- Chinese automakers: Sales in Mexico up 2.8 times y/y
- GM: Ending passenger car production; imports from China soar to 65% of domestic sales
- Stellantis: Plans to produce North America's first first large van EV in Mexico
- Ford: Significant increase in production by limiting production to popular U.S. models; Mustang Mach-E also growing
- VW: Jumped to second place in terms of production volume in 2022, with plans to produce EVs starting in 2025
- Hyundai/Kia: jumped to third place in domestic sales in Mexico
- Nissan: Production and sales both declined due to production constraints caused by semiconductor shortages
- Toyota: Significant increase in production of "Tacoma" by unifying production in North America, sales expansion of hybrid vehicles
- Mazda: Shifting production focus from passenger cars to SUVs, starting production of "CX-3" in 2022
- Honda: Production will be unified to "HR-V", full model change in 2022
- Production Forecast by LMC Automotive: Mexican production expected to be 4.1 million units in 2026
Summary
 |
| Tesla's fifth Gigafactory announced for construction in northern Mexico (Source: Tesla) |
Over the past year or two, Mexico's position in the global automotive industry has changed significantly. One of the major factors is that the U.S., the world’s largest market, has shifted to "friend-shoring," shifting production and procurement to its allies in response to the escalating geopolitical risks caused from the intensifying conflict between the U.S. and China and Russia's invasion of Ukraine. In addition, there is a strong recognition of recent supply chain risks due to the COVID-19 crisis and semiconductor shortages, and Mexico, as a neighboring country in North America, has become more advantageous as an investment destination for "near-shoring" (production closer to the consumption area) to prepare for such risks. The USMCA (U.S.-Mexico-Canada Agreement), which was agreed to in 2020, has been a point of contention over the no-tariff requirement, but against the backdrop of these changes in the environment, the agreement is headed for a resolution in favor of Mexico and Canada in 2023.
In addition, as the automotive industry rapidly develops and introduces new vehicles and new technologies in preparation for the shift to EVs, OEMs and parts suppliers are announcing investment plans for facility expansion and renewal in Mexico, which is the manufacturing hub for vehicles destined for North America, in rapid succession. In March 2023, Tesla officially announced the construction of its fifth vehicle plant (Gigafactory) in northern Mexico, raising expectations for its industrial and economic benefits.
Looking back at the situation in 2022, Mexico's automobile production and sales showed year-over-year (y/y) recovery, increasing by 9.2% and 7.9%, respectively, but there is still a large gap from the levels before the COVID-19 crisis. In addition, the speed of recovery varies greatly from OEM to OEM, and the power structure of the industry is changing. While the dependence on the U.S. market as a destination for exports of production vehicles is further increasing, there are also many noteworthy developments, such as China becoming the largest producer of vehicles imported into Mexico.
This report is an update of our previous report on the USMCA and the Mexican automotive industry (published in March 2022), providing an overview of the latest market situation and organizing and reporting on the trends and announced plans of industry companies, mainly major OEMs.
Related reports:
Tesla: New Manufacturing Process for Next-generation EVs (Mar. 2023)
Emerging U.S. EV Makers on the Move (Feb. 2023)
U.S. Market: Policies to Expand Semiconductor Production and Popularize EVs (Oct. 2022)
Stellantis (Part 2): Group sales and revenue up sharply H1 '22 (Aug. 2022)
Stellantis (Part 1): 75 BEV Models by 2030, Aiming for 5 million Annual BEV Sales (Jul. 2022)
GM (2) Sales supported by Chinese market, profits by U.S. truck sales (Jun. 2022)
GM (1): Accelerating its Electrification Strategy to become the EV Leader in the U.S. (Jun. 2022)
Ford (Part 2): Enhancement of CVs and EVs in EU, Lincoln models and SUVs in China (Apr. 2022)
Ford (Part 1): Focusing on EVs and Commercial Vehicles under the "Ford+" Business Strategy (Mar. 2022)
The USMCA and the Mexican Automotive Industry (Apr. 2022)
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