Market Overview

 In 2008, the automotive industry experienced a significant and rapid decrease in profitability due to declining sales, increased competition, and the higher price of raw materials such as steel and oil. The slowdown of the U.S. and Mexican economies has resulted in dramatic changes in the industry and has forced automakers in Mexico to reduce their production. Market realities have led to new trends in car manufacturing, including smaller car sizes and increased fuel efficiency. Furthermore, the spare parts market will increase as used-vehicles are allowed into Mexico because of NAFTA. As a result, opportunities exist for U.S. exporters of spare parts, equipment and new technologies oriented to reduce costs.

 Mexico’s auto part industry is closely related to the U.S. industry.  There are approximately one thousand auto parts manufacturers in Mexico and about 70% of these are subsidiaries of foreign corporations, mainly from the United States. Fifty eight percent of the automobiles sold in Mexico are imported, of which 75% come from the U.S.  Total production of vehicles in Mexico in 2008 was 2,102,801.

Parts, equipment and first and second tier components from the U.S. have experienced an increase in exports due to increased Mexican production of new models that have shifted from U.S. assembly plants.

 The total market for auto parts in Mexico has shown a slight growth from 2007 to 2008 as per estimates.  The economic outlook for 2009 is for less growth. While estimates vary, the Mexican economy will likely experience a slight contraction, in contrast to 1.9% growth for 2008. Eduardo Solis, Chairman of the Mexican Auto Association, acknowledged that the industry’s situation would worsen in 2009 but expects that it should recover by the end of June.  He added that production will fall by 20% during the first half of the year and that a similar decline is expected in sales.  To offset the fall in sales, the industry and the government will have to work on other strategies to target niches in the domestic market. The industry might also ask the government to reduce taxes for purchasing and owning a car.  Despite the decline in demand and production, many automotive companies announced large investments in Mexico last year. This is due to Mexico’s advantage in low labor costs and recent technological development in the auto industry. In addition, companies are looking for lower manufacturing and export costs

Best Prospects/Services

The greatest opportunities for automotive aftermarket parts include: collision repair parts, catalytic converters, steering wheels, gps systems, sound systems and generally all types of accessories.

In the first and second tier supply chain sector, the best export opportunities for U.S. firms are basically OEM parts and components, hybrid vehicle components, suspension systems, as well as materials, pre-assembly components such as small and progressive stampings, electronic components, equipment and specialized tooling.  

Market Opportunities

U.S. parts, component and equipment manufacturers will see increased export sales as global assembly plants are being relocated to Mexico. The large number of used vehicles that are constantly being imported, especially after the NAFTA decree which allows newer models, provides ample opportunities for exports of repair equipment and replacement parts. After 2009, there will be no restrictions on the importation of used vehicles.

Participation in Mexican automotive trade shows provides excellent opportunities to introduce new products and services in Mexico. For information contact the Mexico Automotive Team members listed below.

Resources

State of Jalisco Auto-parts Distributors Association

The National Association of the Manufacturers of Buses, Trucks and Tractor Trailers

National Auto-parts Industry Association

Mexican Association of Automobile Distributors

Mexican Association of Automotive Industries

National Association of Bus and Cargo Trucks Producers

National Chamber of Cargo Transports

Best Product Opportunities

The greatest opportunities for automotive aftermarket parts will still include collision repair parts, catalytic converters, steering wheels and sound systems and generally all types of accessories. U.S. parts, component and equipment manufacturers will see increased export sales to the assembly plants being established in Mexico. A larger number of used vehicles were recently authorized to be imported for personal use but not for resale. This will provide ample opportunities for exports of repair equipment and parts.

Local associations

State of Jalisco Autoparts Distributors Association
The National Association of the Manufacturers of Buses, Trucks and Tractor Trailers
National Autoparts Industry Association
Mexican Association of Automobile Distributors
Mexican Association of Automotive Industries
National Association of Bus and Cargo Tucks Producers
National Chamber of Cargo Transports

Market Research

Automotive accessories are considered all of those parts that are sold to enhance the appearance of the vehicle, to increase performance, to replace original parts with up-graded luxury items such as seat covers, door and window handles, chrome plated exhaust pipes, larger sized wheels and tires, etc. for cars, pick-ups, and trucks.

Although there is a large amount of local production of these products, the majority of them are imported. The importance of this sub-sector is evidenced by the tremendous size of the annual accessories trade show, SEMA, which is held in Las Vegas, Nevada every year. SEMA exhibitors traditionally display thousands of new products in every show, and for the last several years, the greater part of exhibitors has been from Asian countries, especially China, Taiwan, and Japan. 

Mexico Auto Production

Mexico is currently eleventh in the world in automotive production and by 2011 will rank fifth, competing with stronger economies such as India, United States, China and Slovakia. In a report, PricewaterhouseCoopers affirms that this competition must have a sustained growth by the U.S.companies in the sector, and that they must use with better efficiency, the supplies, tradeagreements, geography and customs benefits provided by Mexican government. 

Mexico: Importing Used Vehicles

The Mexican government announced a change in the used car imports procedure to Mexico starting in February 2008.The new decree states that used cars may not be over 10 years old.  This is because a tremendous amount of older than 10 years units were imported in 2005-2006, causing an important increase in pollution and traffic problems in major cities. From August 2005 to January 2008, 1,776,284 autos between 11 and 15 years old, and 1,073,654 ten-year-old vehicles were imported in Mexico.

Carwash Business in Mexico

With 18.6 million vehicles on the road in 2005, the number of cars on Mexican roads continues to increase at a rapid rate. By 2007, the figure is expected to soar to 20.6 million. The numbers are a clear indication that the Mexican automotive sector holds tremendous potential, both for investment and US exports.

Mexicans view their cars as a reflection of themselves. Therefore, car owners are obsessed with the appearance and cleanliness of their vehicles and wash them an average of 2.2 times per week. Car washing tops the list of the most commonly offered, but least professional service in Mexico. Labor and cleaning products are relatively cheap. To date, Mexico has not instituted water-recycling laws.

Tijuana's Mass Transit System

Tijuana, the fastest growing city in North America, located in Mexico just across the border from San Diego, has more export manufacturing plants than any other city in the country. The municipality of Tijuana recently unveiled a proposal to reform its mass transportation system, as the current infrastructure is unable to effectively service the city’s needs.

Mexico: Auto Parts & Supplies Industry

Automotive accessories are considered all of those parts that are sold to enhance the appearance of the vehicle, to increase performance, to replace original parts with up-graded luxury items such as seat covers, door and window handles, chrome plated exhaust pipes, larger sized wheels and tires, etc. for cars, pick-ups, and trucks. Although there is a large amount of local production of these products, the majority of them are imported. The importance of this sub-sector is evidenced by the tremendous size of the annual accessories trade show, SEMA, which is held in Las Vegas, Nevada every year. SEMA exhibitors traditionally display thousands of new products in every show, and for the last several years, the greater part of exhibitors has been from Asian countries, especially China, Taiwan, and Japan. 

Mexico DF Auto parts

Mexico presents a growing diversity of opportunities for U.S. exporters of auto parts and supplies.  Due to the large-scale automotive vehicle production in Mexico and the growing aftermarket industry for auto parts, Mexico presents two sizeable and promising sub-sectors within the auto parts and supplies industry.  Mexico is the world’s eleventh largest automotive producer and is forecasted to rank fifth by 2011 U.S. Commercial Service, “Automotive Manufacturing Industry.” 

Mexico: New Car Assembly Plant in Michoacan

The construction of a new car-assembly plant with Mexican capital has commenced in the state of Michoacan.  This new project in the western part of Mexico will require diverse suppliers from the automotive industry. This investment project will have a multiplying effect on the economy.

Mexico: The Automobile Industry in Jalisco

Mexico has become the 10th largest automobile exporter in the world, and the first in Latin America.  The state of Jalisco, in particular, is one of the strongest in the country, with over 60 automotive and auto parts companies operating in the state. 

Further Information, Commments, Questions

If you wish to write us regarding these reports, please contact:

Mónica Martínez, US Commercial Service Mexico City
Senior Trade Specialist for the Automotive Industry Sector
U.S. Commercial Service Monterrey, Mexico
Tel.: 011-52-81-8345-2120

Mexico Automotive Team Members

Yazmín Rojas, US Commercial Service Monterrey

Alicia Zayas, US Commercial Service Guadalajara

Mónica Rosas, US Commercial Service Tijuana