The last quarters of the year have been very beneficial to the Mexican economy. Not only did industrial real estate investment improve in Q3, but also the automotive industry in Mexico began Q4 with a high note. It all points to this sector having a great recovery in 2021.
The automotive industry shows great signs of a full recovery
October was quite the month for the Mexican automotive industry as it showed great signs of recovery from the effects of the pandemic. According to INEGI, a total of 347,829 units were manufactured, which represents a production increase of 8.79% from the same month of 2019. Furthermore, monthly exports raised 8.23%, which represents a total of 280,474 units.
According to the Mexican Association of the Automotive Industry (AMIA), the automotive industry represents around 4% of the country’s GDP. It also gives jobs to nearly a million people.
Within the domestic market, new vehicle sales fell in October at an annual rate of 21.28%, to 84,307 units. Nevertheless, it had an increase of 8.4% respectively to the previous month. This has been thanks to the efforts the sector are making to push to include marketing in the list of essential activities.
To which country does Mexico exports the most auto parts?
Thanks to the country’s multiple Free Trade Agreements, Mexico is able to trade freely with 52 countries. When it comes to the automotive industry, the biggest importer of Mexican goods is the United States of America.
The country exports around 3.3 million vehicles yearly, but it is not its strongest asset. Mexico exports more in auto parts than it does in fully equipped vehicles. According to the National Autoparts Industry (INA), auto parts exports represent 1.3 times the value of light vehicles, and 5 times the value of heavy vehicles.
In 2019, auto parts exports to the United States reached $70.5 billion USD. Furthermore, light and heavy vehicles represented $54.8 billion USD and $14.2 billion USD respectively. Mexico houses several auto parts manufacturers, some of them are Vitro, Nemak, Condumex, Metalsa, Continental, Delphi, Bosch, Yazaki, and Rassini.
“Mexico has stood out in recent years when it comes to automobile production, especially in the production of auto parts. The United States took notice of this and it became one of the main focus for the USMCA negotiations,” stated Rocío Mejía, EY Latinoamérica Norte’s Global Trade and Indirect Tax Leader.
What does the automotive industry in Mexico include?
The automotive industry in Mexico includes light vehicles, cargo trucks, and everything in between. This industry doesn’t only manufacture cars, trucks, and tractors, it also produces all the auto parts needed to create, repair, or replace in existing vehicles. It is one of the most important sectors of the Mexican manufacturing industry.
The automotive industry presence is most noticeable in the states of Morelos, Guanajuato, Coahuila, San Luis Potosí, Chihuahua, Querétaro, Jalisco, Baja California, and Nuevo León. Over 600 auto parts manufacturers have settled in the country, with many more to come.
Having easy access to the North American market, and a very cheap labor cost makes Mexico an attractive destination for companies seeking to export their products. The ratification of the USMCA has also helped in boosting the production in the country. The new treaty establishes that vehicles must have a higher percentage of locally sourced materials in order to apply for duty free.
Having such a resilient automotive industry is a great reassurance for any auto parts manufacturer trying to enter the country. Thus, here at VYNMSA we would like to assist you in settling in Mexico.
We are one of the leading industrial real estate developers in Mexico. Plus, we have over 30 years of experience and have delivered over 500 projects to fully satisfied customers. We are also fully equipped to assist you in developing your BTS projects. All while offering lease and sale solutions that always have a win-win approach.
We also are Broker Friendly and have around 20 inventory buildings ready for immediate occupancy. This is a total space of 2 million SqFt across Northeast and Central Mexico.
Contact us and set shop in Mexico with VYNMSA and be part of such a resilient automotive industry
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Sources: Reuters, El Financiero