Mexico auto parts sector sees potential to surpass Germany as fourth largest producer

12 February, 2019

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By the end of 2019, Mexico could displace Germany and become the fourth largest producer of auto parts in the world, due to the arrival of more companies to serve the assembly plants of BMW, Mercedes Benz and Toyota and because of the ongoing trade war, said Oscar Albin, president of the National Auto Parts Industry (INA for its acronym in Spanish).

The leader of the auto parts sector in Mexico said that currently the country has the potential to reach a production volume valued in US$ 100 billion, which represents a 10% growth compared to 2018.

In an interview for El Economista, the official said that the trade war between China and the United States has pushed Chinese suppliers of electrical and electronic parts to set up operations in Mexico, because they can no longer absorb export costs from Asia with a tariff of 25% imposed by Donald Trump.

“There is a series of products that are manufactured in China and it is being considered that they could be produced in Mexico,” said Albin.

At the end of 2018, the Mexican auto parts industry remained the fifth largest producer, below China, the United States, Japan and Germany.

The official added that Mexico's geographic location gives it a unique advantage. “We currently have around 600 suppliers that are considered big exporters of auto parts to the whole world because of that,” he added.

Albin cited some examples of this advantage, such as the fact that transporting a container from the central region of the country to New York takes five days, while taking it to Los Angeles requires four days. Instead, doing it from China takes 32 days to New York and 18 days to Los Angeles.

Another example is that the logistics cost of transporting a container from Monterrey to Chicago is US$ 3,000, while doing it from Shanghai to Chicago costs US$ 5,000.

As long as more than 17 million cars continue to be produced in North America, Mexico will benefit from it, said the official. “With the United States fighting the whole world and forcing more plants to install in the region, I’m ok with it, because I don’t sell anything to a car that’s made in Japan, but if it is manufactured in the U.S., I will sell it US$ 4,000 in parts,” he concluded.

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