Automotive production in Mexico falls 29.3% in June
The National Institute of Statistics and Geography (Inegi) reported that automotive production in Mexico fell 29.3 percent in June, compared to the same period in 2019. According to the Institute, last month 238,946 cars were produced.
In contrast to April and May, June represented a slowdown: the drop was 98.8 and 93.7 percent, respectively. During the COVID-19 pandemic, the federal government considered the automotive sector to be one of the essential industries. As a result, they were allowed to restart their activities in June.
Challenges of the automotive industry in Mexico
The automotive industry is preparing to face two challenges in the short term, the entry into force of the Treaty Mexico, United States, Canada of T-MEC on July 1 and the reactivation of the sector to be considered essential in the health emergency against coronavirus, both are the two most important challenges, agreed the associations of heavy vehicles, light vehicles, auto parts and distributors in the country.
The T-MEC is of paramount importance and the challenge will be to comply with new rules of origin that provide for increasing the value of regional content in essential components and parts, such as the fact that 70 percent of steel and aluminum purchases are in the region.
With the late publication of the uniform T-MEC regulations, there is not enough time to have a detailed analysis of how this new regulation would be enforced. It is very likely that practically all companies will apply for the alternative transition regime. Individual plans will have to be presented to the governments of the three countries in order to be approved and, if necessary, to have a different transition period than the one established by the treaty itself.
With the entry into force of the T-MEC, labor issues will be of critical importance. For example, the United States will request that the new labor regulations provided for in the agreement be applied in Mexico, and therefore, one must be prepared.
With regard to the reopening of operations in front of the covid-19, the Automotive Associations together with the Mexican Institute of Social Security and the Secretariat of Labor and Social Welfare developed protocols that allow workplaces to carry out a situational diagnosis of the conditions, equipment, resources, and materials needed to be considered, in order to ensure the safe return of their workers to the essential activities of the workplace, so they reactivated their operations on June 1st.
The automotive industry in Mexico
In Mexico, the automotive sector has a high economic value, leaving about 3.6% of Gross Domestic Product (GDP) year after year. It keeps a level of competitiveness and quality comparable to China, India, South Korea or Brazil. In the plants installed in the north of the country, about 3.9 million cars are produced annually, thus placing it as the sixth-largest producer of vehicles in the world, just below Germany and above South Korea.
The states that are directly benefited by the generation of employment in this sector are Aguascalientes, Nuevo Leon, Morelos, Guanajuato, San Luis Potosi, Coahuila, Puebla, Sonora, State of Mexico, Jalisco and Baja California.
The companies installed under this heading are Hyundai Motor Company, Toyota Motor Corporation, Bayerische Motoren Werke AG (BMW), Mazda Motor Corporation, Fiat Chrysler Automobiles, Honda Motor Co. Ltd, Audi AG, Ford Motor Company, Volkswagen Aktiengesellschaft, General Motors Company, and Nissan Motor Company, Limited.
The 43 plants in Mexico generate about 530,000 direct and indirect jobs, which will be affected by the COVID-19, as well as exports, which are predominantly to the United States and Canada.