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Despite the new US administration, forecasts for car manufacturers in Mexico remain positive

The new US administration is pushing for all future automotive plants that supply the US market to be built in the US instead of Mexico and is threatening to implement punitive tariffs. This puts pressure on the automotive industry in Mexico, but most manufacturers seem to be going ahead with their expansion plans. The outlook for Swiss suppliers is still positive.

Despite the new US government, forecasts for car workers in Mexico remain positive
Car manufacturers in Mexico do not want the US government to put pressure on them.

Sales of cars and light commercial vehicles in Mexico, the seventh-largest automobile manufacturer in the world, will probably be somewhat under the 2016 figures. The automobile distributor association AMDA estimates that sales will increase by just 7% to around 1.7 million units. In the previous year, there was an 18.6% increase. However, the main topic among car manufacturers in Mexico isn't the sales figures, but US President Donald Trump's call for new investments to be made in the USA and not in Mexico. The industry is alarmed at the announcement of punitive tariffs and stark criticisms of the NAFTA free trade agreement.

Manufacturers intend to build new plants

Despite everything, this pressure from the US government doesn't seem to be having much effect. Ford has made plans for a new plant in the state of San Luis Potosí; General Motors, Toyota, Honda, Mercedes-Benz, Fiat Chrysler and BMW intend to hold onto their investments in Mexico. Audi opened a new plant in the state of Puebla in September 2016, and shortly before that Kia opened a production facility in Nuevo León. Three automobile plants are currently in the planning phase or under construction. This year, Mercedes-Benz intends to open a new production facility in Aguascalientes together with Nissan. In 2019, BMW in San Luis Potosí and Toyota in Guanajuato are to follow. Nissan and Toyota also both plan to invest around 150 million USD in existing plants.

Even though the outlook for the automotive industry is not as dynamic as it has been, the AMDA is sticking to its forecast: Around 5 million cars and small commercial vehicles are to be built in Mexico in 2020. Last year, the production figures were still at 3.5 million vehicles. Mexico is not deviating from its goal of becoming a hub for the global automotive business.

Opportunities for Swiss suppliers

"The Mexican market offers the Swiss automotive industry excellent sales opportunities, because Mexico as a production location is seeing more and more use as an international platform. For instance, global production for the new Audi Q5 is done at the new plant in Puebla. As a result, the USA is becoming less important as a sales market," says Ulrich Hinterberger, Consultant for Mexico and Latin America. "It is important to be well-prepared for this competitive market."

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