Foreign investment in the automotive sector sinks 67% during the first quarter

Foreign investment in the automotive sector sinks 67% during the first quarter

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The uncertainty created by the renegotiation of NAFTA and the elections in Mexico caused a reduction in the Foreign Direct Investment (FDI) for the automotive industry to its lowest in the last 12 years.

During the first quarter of 2018, US$639.2 million went into this sector, which meant a 67% drop compared to the same period of 2017 and the lowest level for a similar period since 2006, according to data from the Ministry of Economy (SE).

By segment, the figures of the SE reveal that the production of auto parts received in the first three months of the year was US$400 million of FDI, 64.1% less than in the same period of last year, the lowest amount in nine years.

Another item that also received less investment was the assembly of cars and trucks, with US$ 239.2 million, which represents a decrease of 70.2%.

"Foreign investment has stopped mainly for Asians, who are more cautious, but it does not mean that they have closed their plants, they are just waiting. In the case of the German companies, they still keep going, but the American ones they stopped projects since last year," said Jorge Yanez, specialist partner in the automotive sector of Hogan Lovells BSTL.

The great uncertainty in the sector, he said, has to do with the rules of origin and how the supply chain will be.

Meanwhile, Tadashi Minemura, general manager in Mexico of the Japan Foreign Trade Organization (JETRO), told a recent press conference that Japanese firms, mainly auto parts suppliers, paused their investment plans in Mexico until they learned about the results of the renegotiation of NAFTA.

"Large companies continue with their plans, but they do so discreetly, because they want to avoid comments from (Donald) Trump on Twitter," he said.


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