Automotive production in Mexico picked up pace in April

The number of automotive production in Mexico this year exceeded by more than 260 thousand the figure seen in the same month but in 2020. Here we explain why.

Automotive production in Mexico picked up pace in April
Mexican automotive production ramps up in April. Image: Pixabay

In April, 269,180 cars were assembled in Mexico, a figure much higher than the 3,722 cars that were assembled in the same month last year, the National Institute of Statistics and Geography (INEGI) reported this Friday. This is due to the fact that last year the "Jornada de Sana Distancia" was applied to prevent the spread of the coronavirus, which caused industries that were not essential to the economy to stop operations, among them vehicle assemblers.

This was also reflected in car exports, where companies sent 234,119 units abroad, more than 600 percent higher than what was reported in the fourth month of 2020. General Motors was the company that sent the most cars abroad with 55,400 units, followed by Stellantis (formerly FCA) with 27,814 cars, and then Nissan with 25,438 cars.

In cumulative figures, between January and April 2021, one million 90 thousand 304 cars were produced in Mexico, 16.33 percent higher than that reported in the same period last year. In terms of exports, 928,223 cars were exported in the first four months of the year, 10.67 percent higher than in the same period of 2020.

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.