Mexican auto industry continues rebound

Dr. Eduardo Solis, AMIA - President

Mexican auto industry continues rebound; more than 1 of every 2 vehicles sold in U.S. represents 'Hecho en México'
New data shows a strengthening of Mexican auto exports into the U.S., despite a sluggish sales picture south of the Rio Grande/Rio Bravo. However, Dr. Eduardo Solis, president of the Mexican Automotive Industry Association (AMIA) continues to lead activity to bolster the home front picture and sees better days ahead for domestic sales, exports and industry investment in his country: 

MEXICONOW: Dr. Solis, it appears the North American vehicle build rate bottomed out in 2009 at about 10 million. In 2010 it got closer to 12 million. To what extent do you see a rebound in the Mexican auto industry?

Dr. Eduardo Solis, President, Mexican Automotive Industry Association: The numbers are telling the story. During the crisis in 2009 we dropped to about five percent of the vehicles sold in the U.S. market. Now we are about 11 percent of the total vehicle market in the United States -- about 11 of every 100 vehicles sold in the U.S. are Mexican made. Mexico has been able to gain in the U.S. market; our exports are going up nicely. We know the U.S. economy is not growing at the pace we thought it would. It seems the U.S. recovery will take longer than expected. 
The U.S. industry in 2010 grew at about 10 percent. Our Mexican exports grew at a rate slightly above 50 percent. It is important to remind ourselves that the U.S. represents our single most important market. 

Last you reported autos as a $17 billion net export industry for Mexico. What is your projection for this year?

The numbers show that in 2010 we built 1.86 million vehicles for export. During the year we produced a total of 2.26 million units. We have production numbers that are the highest in our history. Our previous highest production was at 2.2 million, but we beat that number in 2010, precisely because of the performance of the exports and in spite of lower domestic sales. 

Let's take a look at Mexico's domestic market. How did you close out 2010?

The Mexican market is completely different than the export market. It is the other side of the coin. As we have been performing quite nicely with our exports, unfortunately we cannot say the same about the Mexican market. The Mexican market has been performing quite poorly. In 2010 we had sales at 8.8 percent higher compared to 2009. The fact is that 2009 was quite a terrible year for the industry and for domestic sales. When we compare to 2008, the period leading to the crisis, the 2010 sales are 22 percent under the 2008 sales. The consumer confidence index in Mexico is growing modestly. Reports by Banco de Mexico and INEGI show we have a total four percent lower than the index back in 2008. Consumer confidence index which drives domestic sales are still not growing at the pace we need to have in order to be at the numbers prior to the crisis. 
In absolute terms it means that in 2008 we had domestic sales of 1,050,000 units. In 2009 we had 754,000 units sold in the Mexican market, and for 2010, we reached 820,000 . 
Our largest ever was 1,150,000 back in 2006. Domestic sales should be 1,800,000. We are one million below that. 
That is why the agenda of this association is centered on ways to promote and activate our domestic sales. Namely, we are working with the government on developing standards for used vehicles. We are working with them to gain order in the importation of used vehicles from the U.S. used-vehicle market. We are also working in other ways to try to promote sales. One million more vehicles sold represents about 500,000 jobs in the industry. 

Looking ahead, to what extent does Mexico still offer a competitive advantage for the Tier-I automotive supplier who may be thinking about setting up shop in Mexico?

I would say that the opportunities in Mexico are huge. That is because we are working with certain sectors toward growing the market which will take us some years. We have a tremendous export market that is in a need of Tier-I, Tier-II and even Tier-III's. It is important to point out the fact that Mexico is the single largest supplier of auto parts into the U.S. market by far. But nevertheless we still import some components -- about $15 billion, mostly from America. I do believe that Mexico is destined for investments from the U.S. and Canadian suppliers. I would also add to that Japanese and Germans are coming. 

Concerning Mexico's congressional auto commission, to what extent do they support your work and industry?

We have been working quite closely with the commission. Unfortunately, we have not been able to arrive at concrete measures that we should put in place. 
We have been asking for two items: One is for a vehicle renewal program. The other is for research and development funds. The automotive industry is the single most dynamic user of research and development for manufacturing in Mexico. We have been working closely with the commission, but have not been able to address these important needs in Mexico. 

What needs to happen in Mexico in order that your economy is less dependent on the U.S. economy?

There is no doubt we are linked to the U.S. economy. More than 95 percent of our economy is closely linked to the U.S. 
Nevertheless, I think the crisis has left us with a lesson whereby the Mexican market -- the domestic market in Mexico -- should be looked at and supported by the government. We should be working to the best so that Mexico is in better shape. Mexico is and will continue to be a world-class platform for manufacturing for export. As we do that we should be taking measures for a stronger domestic market. 

How has the security, or lack of, affected Mexico's auto industry?

We are concerned about this situation as every Mexican is. I could not support the idea that this has had an impact on investments. 
The automotive sector has witnessed investments over the past months and years and we have all witnessed the setting up of new plants for vehicles, engines and transmissions. 
We all understand the Mexican federal government is doing its best within its strategy. It is a difficult situation, but I would not link one to another. 

When you look at competitiveness, a recent report from the World Economic Forum has Mexico at 66th of 139 global economies -- representing a drop from the low-50's a couple years ago. To what degree does that concern you, and what must Mexico do to improve?

It concerns everyone including the industry and government. Mexico needs to take the next steps in areas including labor and fiscal reforms and to open more sectors such as telecommunications. Mexico is quite well positioned to continue to be a successful platform for manufacturing and for professional services and we ought to take the next step to give the market the kind of certainty that is needed to compete with all the countries in the world. We should take this very seriously. 

You work closely with higher education, telling them the needs of your industry. What must the Mexican educational system do to make sure the best candidates be ready to work with the auto industry?

I have been an advocate for research centers to become key players and work hand and hand with the industry. By working with the government agencies the industry can bring the technical standards into classrooms for engineers needed in the industry. 

Looking at the year 2020, what is your vision as to what the Mexican auto industry will look like?

We are going to continue responding to the needs of the world markets, specifically with new technologies and specifically with more efficient, cleaner, greener technologies. Mexico is going to continue to be a key player. Mexico has the possibility to stay in the Top 10 manufacturers for vehicle production. We can have a very strong domestic market.