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The Automotive Sector

Global Industry

The value of the automotive industry’s production of light vehicles was 728,5291 million USD, representing a 5.7% growth compared with the previous year. A total of 59.93 million units were produced.¹

The value of the automotive industry’s production of heavy vehicles was 509,900 million USD, representing a 29.3% growth compared with the previous year. A total of 20.13 million units were produced.¹

According to the ranking of 40 countries generated by the International Organization of Motor Vehicle Manufacturers (OICA) and using the production of vehicular units as a parameter, Mexico took eighth place among the principal producers on a global level, above countries such as Spain, France, Russia, the United Kingdom and Belgium.

The ten most important producers of automobiles are: China followed by the United States, Japan, Germany, South Korea, India, Brazil, Mexico, Spain and France.

The companies with most sales globally were:

Mexico

Production

The country is the second largest producer of vehicles in Latin America.²

National production of vehicles was 2.55 million units in 2011, representing a growth of 13% over the previous year.⁶

The industry represents approximately 4% of the GDP, and 20% of national manufacturing production.³

According to estimations Mexico will produce more than 3 million vehicles by the end of 2015- double the number of units produced in 2009 (1.5 million vehicles).⁴

In 2011, the autoparts industry reached its highest production level with 67,989 million USD. Electrical auto parts contributed with 22% of the production in 2011, the highest participation by component in the industry.⁵

Principal Companies Established in Mexico

Auto Parts Delphi, Nemak, Magna International, Continental, Lear Corporation, Metalsa, Autolive, TRW Automotive, Johnsons Controls, Valeo, Bosch, Faurecia y Denso.

Vehicle Automakers GM, Ford, Chrysler, Volkswagen, Nissan, Daimler, Honda, BMW, Toyota, Mazda, Volvo y Mercedes-Benz.

Consumption

In 2011, more than 905,886 vehicles were sold in Mexico, and it is estimated that during the 2013-2016 period, growth in sales will be 8%, reaching 1,141,155 vehicles.⁶

 International Trade

From 2009 to 2011, exports in the automotive industry registered a growth of 75.2% moving from 1.2 million to 2.1 million vehicles.

Mexico reported a total of 473,494 light vehicle imports in 2011, representing a growth of 6.1% in comparison to 2010 (446,371 units).⁶

The automotive industry represented 23% of all national exports.⁷

80% of the value of Mexican vehicles exports went to the United States. The rest of the exports were divided among more than 100 countries.

Mexico is the principal supplier of auto parts to the United States.8 In 2011, 89% of Mexican auto parts exports went to the United States.⁸

Exports diversification in Mexico plays a big role in the industry, for example in 2011, 64% of the light vehicles were exported to the United States compared with the 69% of 2010.⁶

In 2011, 15% of the total number of light vehicles were exported to Latin America, compared with 2010 when 11% of the Mexican exports of light vehicles were exported to the region.⁶

Since 2010 the region of Latin America replaced Canada as the second destination for Mexican exports. The main importers were Brazil, Argentina, Colombia and Chile.⁸

10 of every 100 vehicles exported from Mexico went to the European Union (EU).⁶

In 2011, considering light vehicles, Mexico is the 5th exporter as regards value at a global level, above the BRICs.

Foreign Direct Investment (FDI)

In Mexico, the automotive sector represented 6% of the total direct foreign investment (FDI) in 2011.9 This shows that the country is an attractive destination for investment in the sector.

Important companies like VW, Fiat, Jatco, Daimler, Pirelli and GM announced investments of more than 4,000 million USD for the manufacture of complete vehicles, engines and transmissions, among others.

During 2011, investment in the auto parts sector reached a total of 996 million USD and generated 602,816 job opportunities.

 

Success Stories

The models being produced exclusively in Mexico comply with the strictest quality standards such as ISO 9000, ISO/ TS 16949, ISO 14000, Six Sigma, Lean Manufacturing, 5 Ss and Balanced Scorecard.

The manufacturing sites of Volkswagen in Puebla and Nissan in Aguascalientes were recognized as the North America’s top producers in 2011. The Volkswagen´s plant in Puebla produced 510,041 vehicle units, followed by Nissan Aguascalientes with 360,796 vehicle units demonstrating the production capacity of the assemblers in Mexico.

Mexico is the leader in the manufacture of systems featuring electrical parts, transmissions, gears and engine parts. A few examples are:

Nissan. announced the construction of its third plant in Mexico. It will be allocated in Aguascalientes and it is expected to produce 175,000 vehicle units per year for 2013, it will generate 3,000 direct jobs and 9,000 indirect jobs. The total amount of this new investment will be over 2,000 million USD.

Ford. In 2012, Ford announced the expansion of the plant located in Hermosillo, Sonora with a total investment of 1,300 milllion USD for the production of the Lincoln MKZ and Ford Fusion 2013.

Honda. With an investment of 800 million USD, the company will open a new plant located in Celaya, Guanajuato, with a production capacity of 200 thousand units per year, destined to the domestic market and North America.

Pirelli. A pioneer in the production of Flat Tyre and Green Tyre announced a 210 million USD investment in a plant in Silao, Guanajuato.

General Motors. The company will invest 420 million USD in the San Luis Potosi, San Luis Potosi and the Silao, Guanajuato complex, where the Chevrolet Trax and a new generation of pick ups will be produced .

Competitiveness

According to estimations from AlixPartners in 2012, Mexico is the most competitive country worldwide in terms of manufacturing costs, with approximately 21% less than USA, 11% less than China and 3% less than India.¹⁰

In 2011, according to KPMG, Mexico offered 13% savings in automotive parts manufacturing costs compared to the United States.¹¹

 

According to the World Bank, Mexico is ranked 53 in the world for doing business, over the BRICs and leading the TIMBIs.¹²

Only 9 days and 6 procedures are required to start a new business, which makes this process much easier than in the BRICs.¹²

In the past decade, the average annual growth rate of engineering graduates in Mexico was 7% which places it above the population growth rate.13 In 2010, the number of engineering graduates in the country totaled approximately 114,000.¹⁴

 A Message for Investors

84 out of the top 100 auto parts companies in the world have set up manufacturing operations in Mexico.

There are 19 vehicle OEM’s (Original Equipment Manufacturers) located in 16 states across the nation and 3,000 suppliers in 24 states.

In the automotive sector, Mexico has an internal growth market, which will increase by 8.0% between 2013 and 2016.¹⁵

As a result of free trade agreements (FTAs) with more than 40 countries, Mexico has access to a potential market of more than one thousand million consumers, and 63% of the world GDP, positioning it as an important export platform.

According to The Atlas of Economic Complexity, Mexico rank as the 20th place from 128 countries. Mexico is the best positioned country in Latin America and the Caribbean region, and over the BRICs.

México is a safe place for foreign investment. Our country has signed 28 IPPAs (Investment Promotion and Protection Agreements) and DTTs (Double Taxation Treaties) with more than 40 countries.¹⁶

Shelter Services: these allow businesses to start operations more easily, as they issue the necessary permits for them to begin operations without having to worry about customs, legality and administrative topics.

Industry Incentives¹⁶

Automotive Decree

Its objective is to place productive investments in national territory, provided that they include:

• Expansion or construction of installations.
• Training and job generation.
• Investment in R&D from businesses in the sector.

And its benefits are:

• The inclusion of manufacturing companies under the Customs and Manufacturing Law under the Sectorial Promotion Program (PROSEC) for the automotive and auto parts industry.
• Offering their vehicles, directly or by way of authorized distributors through documentation for each procurement tender.
• Importing 10% of the production of the previous year with zero ad-valorem taxes.

Sectorial Promotion Program (PROSEC)

It is an instrument designed for manufacturers, to import their materials with preferential tax arrangements or exemptions, with the objective of maintaining their competitiveness.

Manufacturing, Bonded Assembly and Export Services Industry (IMMEX)

It simplifies the procedures and requirements for companies which have a structured business plan, allowing for the import of goods and services used in industrial processes for the development, transformation (modification) or repair of merchandise imported from abroad.

Chambers & Associations

The National Auto Parts Industry (INA)

Was created in 1961 to represent the automotive sector vis a vis international organizations, governmental authorities, sectorial chambers and academia. It has 950 members.

The Mexican Association of the Automotive Industry (AMIA)

Is a civil association comprised of vehicle manufacturing companies, which was founded in 1951. Its objective is to have exclusive representation for this industrial sector. It represents the ten major automakers in the country.

The National Association of Producers of Buses, Trucks and Tracto-Trucks (ANPACT)

Was founded in 1992. It represents the 13 heavy vehicle manufacturers (more than 6.3 tons) and diesel engines and is focused on promoting the development of the Motor Vehicle Transportation Industry in Mexico.

 

Sources:

 

1. Source: Datamonitor

2. Source: OICA

3. Source: INEGI

4. Source: Global Insight, Business Monitor

 

5. Source: National Industry of Auto parts (INA)

6. Source: AMIA

7.Source: Business Monitor International

8. Source: Global Trade Atlas

9. Source: Ministry of Economy

 

10. Source: Alix Partners 2011 (Multiple Variable Scenario)

11. Source: KPMG 2012

12. Source: Doing Business WB 2012

 

13. 1.4% annual average in the period 2000-2010, INEGI

14. Source: CONACYT

15. Source: Business Monitor

16. Source: Ministry of Economy/SHCP

 

 

 

 

 

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