Dr.Eduardo Solis, President-AMIA By Graeme Stewart
Fasten your seat belts and hang on to your steering wheels! If you thought things had been going well for Mexico’s automotive industry, then you ain’t seen nothing yet.
That was the cry from Dr. Eduardo Solis, President of the Mexican Automotive Industry Association, at the MEXICONOW’s “Mexico Auto Industry Summit” in Leon, Guanajuato.
To the delight of delegates in Leon’s Poliforum, Dr. Solis declared: “This is Mexico’s time in the automotive industry . . . we’re going through a boom time but it’s going to get even better. Over the next seven years, Mexico is going to be very dynamic in this industry.”
In fact, Dr. Solis said the auto industry would be “ultra-dynamic” as he expected it to grow at a pace not witnessed over the past 20 years, “and over the past 20 years we have already seen a boom in the industry.”
He told MEXICONOW: “The good news is that we still have to see the next stage in the auto industry in Mexico when we will reach 5 million vehicles being manufactured a year in this country – and that is considering only those projects that are well under way. There are others in the pipeline that I can’t mention at this stage – but they are coming!”
He based his enthusiasm on six reasons: Geographic location, zero tariffs in major markets, a trade agreements network with major regions around the world, the strength of the automotive supply chain, young and eager to learn technicians and engineers and economic stability.
He added: “Also, and this is very important, the Government is a major partner to help with land and infrastructure investments.”
He said: “After the arrival of Asian and European luxury car companies, the automotive industry in Mexico is emerging as one of the top three producers of motors in the world, with an expected assembly of 5 million vehicles by 2020.”
Dr. Solis also said that in the coming years Mexico would export 4 million cars to dozens of countries and added: “This is the industry that generates the most net foreign exchange. This year, US$47 billion were generated against the US$43 billion generated in 2013. By 2013 and 2014, Mexico was positioned as one of the favorite destinations for Japanese investment, with the installation of new automotive plants like Mazda, Honda and the expansion of Nissan.
“The new capital investments are focused on increasing their presence in the U.S. taking advantage of the proximity of Mexico to the largest market in the world. With the boom of Mexican auto manufacturing and the lower production of Brazil, this year Mexico will reach the seventh production rank worldwide.”
He reiterated that the auto industry in Mexico was the country’s top generator of foreign reserves, with a foreign trade surplus of US$43 billion in 2013 and growing in 2014, it was an industry of more than 20 per cent of manufacturing exports and had become the seventh largest manufacturer of light vehicles and the first in Latin America. Mexico had become the fourth largest exporter in the world and the sixth largest automotive parts exporter and first supplier for the United States.
In a graphic illustrating Mexico’s auto industry as the country’s top generator of foreign reserves, Dr. Solis compared the auto industry’s foreign reserves generation to that of oil products exports, remittances income and tourism income.
It shows that, from January to August, 2014, automotive exports were 1.8 times that of oil products exports, 3.5 times that of foreign remittance income and 4.9 times of tourism income; with the auto industry total at US$54.5 billion, oil products at US$30.1 billion, remittances income at US$15.6 billion and tourism income at US$11.1 billion.
On production, he said: “The hard data of the last 20 years in North America shows that Mexico increased its North American production share by 12% over the last 20 years and that the United States and Canada decreased 11% and 1% during the same period.
“It also shows that 67% of North American light vehicles production still takes place in the U.S. But, let me tell you, it is not sustainable that the United States keeps up its share in North America.”
On the potential growth of Mexico’s auto industry in the coming years, Dr. Solis said: “Considering new investments, our forecast is that Mexico will be producing more than 5 million vehicles in 2020. With an increase to 5.1 million vehicles in the next seven years, Mexico could increase its NAFTA share by 8.5%.”
Dr. Solis outlined the challenges and opportunities that lay ahead for the Mexico auto industry. He said: “The domestic market is our greatest challenge for our 2013 domestic figures were the same as in 2004. That has to improve and it is a major item for the Mexican automotive sector.”
But Mexico will remain as a world export base and a protagonist in Latin America and the world. The auto industry will keep its place as a major exporter but the local supply chain needs to be strengthened at the tier 2 and tier 3 levels.