Mexico auto sector down but still kicking

By attacking the North American Free Trade Agreement, promising a U.S.-Mexico border wall and embracing protectionist policies, President Trump has managed to dent Mexico’s auto industry over the last year.

But the damage is far less than what some economic analysts on both sides of the border feared, leaving Mexican trade negotiators holding a stronger hand than expected as talks to renegotiate NAFTA head into their eighth round next month.

With two months of Mexico industry numbers in for this year, the biggest casualty of the administration’s tough talk is the sharp drop in domestic Mexican auto sales.

Economic uncertainty is kryptonite for consumer confidence, and the combination of Trump’s threat to exit NAFTA and the prospect of a leftist Mexican president taking power in December after elections in July has car buyers on edge.

Auto sales in Mexico fell 7.2 percent in February to 109,484 units, bringing the accumulated retreat for the first two months of the year to 9.4 percent.

Auto deliveries have fallen for eight straight months, according to the Mexican Automobile Distributors Association.

Mexico notched record auto sales of 1.6 million in 2016, followed by a drop to just over 1.5 million last year. While that pales in comparison to the U.S., Mexico is a young market with more than 120 million people and potential for big gains over time.

Despite rising interest rates, higher sticker prices and a spike in gasoline prices as government subsidies were lifted, the auto industry and the Mexican economy in general are holding up reasonably well, according to industry officials.

“The strong economic crisis that some analysts anticipated from anti-Mexico policies and the protectionism exacerbated by Trump has not come to pass,” said Guillermo Rosales, head of the auto distributors association.

While Mexican consumers are holding back to see what happens with NAFTA and the presidential race, Mexico’s auto export sector is going gangbusters and delivering trade surpluses that are helping to stabilize the economy, Rosales said.

Auto output rose 6.2 percent in February to 328,352 light cars and trucks. For the first two months of the year, production rose 6.1 percent to a record 632,107 units, according to the Mexican Automotive Industry Association.

Mexican auto exports in the January-February period rose 8.5 percent to just over 507,000 vehicles, also a record. About three-quarters of the exports went to the U.S.

Eduardo Solis, head of the auto industry association, also stressed another record: Mexico had a nearly $71 billion trade surplus in autos and auto parts last year, including light and heavy vehicles and motorcycles. Most of that is with the U.S., and Mexico’s trade surplus was one of the original reasons that candidate Trump put a target on NAFTA with a promise to fix it or abandon it.

Mexico’s economy minister and chief NAFTA negotiator, Ildefonso Guajardo, said last week that the auto portion of the accord needs to be modernized to reflect the vast changes made in the automobile itself over the last 26 years.

NAFTA was negotiated using a 1992 model of the typical auto when determining which parts would qualify as tariff-free North American content, he said. That vehicle no longer exists with all the changes in technology and advances in materials such as plastics, steel and aluminum, Guajardo said at a press conference.

His position was a break with the auto industry trade group and Solis, who want the so-called rules of origin to stay the same.

Those rules use the parts list from the 1994 agreement and set the minimum North American content for tariff-free treatment at 62.5 percent.

The U.S. wants a new parts list, higher levels of North American content and a minimum amount of U.S. content in tariff-free cars as well. Mexico and Canada have rejected the special carve-out for U.S. content as an unfair trade advantage.

Still, Guajardo signaled increased Mexican flexibility on the rules of origin, suggesting—hypothetically—that the North America content requirement could remain at 62.5 percent or rise to 67.5 percent or 68 percent “or whatever it ends up being,” and include a phase-in period.

Guajardo said his message to Solis would be: “We are going to work on new rules for regional content—period.”

You can reach Laurence Iliff at



Mexico City Committee
essay writer
write my essay
write my essay for me
write my essay online
write my paper