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Mexico's Auto Industry Hits Export Record, Aims for More

Karla Salinas | 28.01.2015

Enjoying a strong tug from the growing U.S. economy, Mexico’s automotive industry logged record production and exports last year and expects output to rise further in 2015, industry officials said.

Enjoying a strong tug from the growing U.S. economy, Mexico’s automotive industry logged record production and exports last year and expects output to rise further in 2015, industry officials said.

The auto makers produced more than 3.2 million vehicles, a nearly 10% increase over 2013, and exported 82% of them—overwhelmingly to U.S. consumers—said Eduardo Solis, executive president of the Mexican Automotive Industry Association.

With both existing and new factories ramping up, Mr. Solis predicted that Mexico could manufacture as many as 3.5 million light vehicles this year. He calculates annual production will total 5 million vehicles by the end of the decade.

“Mexico without doubt has an automotive sector that is a safe bet,” Mr. Solis said at a news conference.

The industry’s Mexican results contrast sharply with those in Brazil, which suffered a second straight year of declines in 2014. Domestic demand, which accounts for about 85% of automotive sales, has slumped along with the overall Brazilian economy.

Brazil produced 3.1 million vehicles of all kinds in 2014, and Mexico has edged it out as world’s seventh largest automotive producer.

Although Mexico ships vehicles to more than 100 countries, and experts see its global sales rising sharply in the coming year, the automotive plants’ fate remains tightly hitched to North American markets.

U.S. and Canada together bought four out of every five of the more than 2.6 million vehicles exported last year, Mr. Solis said. And while U.S. auto sales grew nearly 6% in 2014 to 16.4 million vehicles, the market share of Mexican produced vehicles sold north of the border jumped by nearly 14%.

Mexican vehicle shipments to Canada, at 267,000, zoomed up by more than a third last year.

Mexico has experienced an automotive boom through the past decade, with 2014’s production double that of 2005. The growth has accelerated in the past several years and industry and government officials expect it to continue doing so through the end of the decade.

Nissan , which accounts for about a quarter of Mexico’s total production, ramped up production at its expanded plant in the central state of Aguascalientes. This past spring, Honda and Mazdabegan production at plants in neighboring Guanajuato state.

Kia Motors is building a plant in the northern city of Monterrey, about 140 miles south of the Rio Grande, that company executives plan to bring online next year and quickly raise output to 300,000 vehicles annually. An Audi plant being built southeast of Mexico City that will produce export-focused luxury SUVs, also will begin production next year.

Renault-Nissan Alliance and Daimler executives in June announced plans to produce luxury crossover vehicles at Nissan’s Aguascalientes site. BMW said it intends to produce its own luxury vehicles at factory it is building in north-central San Luis Potosí state by 2018.

Ford, General Motors and Volkswagen have undertaken multibillion-dollar expansions of their own.

Despite an overall economy that likely grew little more than 2% last year, domestic Mexican vehicle sales increased by about 7% to around 1 million vehicles, said Guillermo Rosales, executive director of the Mexican Automobile Dealers Association.

While that marked a recovery at last from the sales collapse during the 2008-2009 financial crisis, domestic sales are still below those of 2005, Mr. Rosales noted. He and other industry executives complain that the importation of nearly 8 million used U.S. cars since late 2005 has muffled internal demand for new vehicles.

Low Mexican salaries might play a role as well. Girding the domestic sales growth last year were dealer promotions that kept the average vehicle price increase to less than 1% over 2013 levels. That is about a quarter of Mexico’s overall inflation rate, Mr. Rosales said.

Source: The Wall Street Journal by DUDLEY ALTHAUS