Mexican Automotive Industry

Eduardo J. Solís

Executive President Mexican Automotive Industry Association

Mexican Automotive Industry

• • Contributes with 3.5% of total GDP and 19.8% of manufacturing industry GDP.

• Impacts more than 23 industrial sectors.

Employs13.4% of total industrial labor (2010).

Automotive GDP in Mexico

Source: AMIA.

Light Vehicles Assembly Plants in Mexico

New plants announced:

Research Centers and Auto Test Tracks in Mexico

Source: Unidad de Inteligencia de Negocios – PROMEXICO.

Investment

• Mexico's automobile and auto parts manufacturers represented 20.8% of total foreign direct investment (FDI) in 2012. • Automobile and auto parts industries investment for 2006-2012 period added 13.283 billion dollars, an 8.8% share of total FDI received in Mexico during that period.

Automotive Foreign Direct Investment (million dollars)

Production and Exports

• Mexico is ranked as the 8 th vehicle manufacturer and the 4 th exporter in the world.

3 000 000 2 500 000 2 000 000 1 500 000 1 000 000 500 000 0

Light Vehicles Production

Jan-Aug 2013 Jan-Aug 2014 Brazil Mexico Thailand

Source: ANFAVEA, AMIA, FOURIN y ADEFA.

Argentina

Light Vehicles Exports

3 000 000 2 500 000 2 000 000 1 500 000 1 000 000 500 000 0 Jan-Jul 2013 Jan-Jul 2014 Japan Germany Korea Mexico Brazil Argentina

Source: JAMA, VDA, KAMA, AMIA, ANFAVEA y ADEFA..

Mexican Automotive Industry Production and Exports

• 2013: – Contributed with 3.5% of total world production.

– – More than 80% of total production goes to foreign markets.

Contributes with 22.5% of total value of Mexican industry sector exports.

Light vehicle production

3 500 000 3 000 000 2 500 000 2 000 000 1 500 000 1 000 000 500 000 0 domestic foreing 2007 2008 2009 2010 2011 2012 2013 Jan-Aug 2013 Jan-Aug 2014

Source: AMIA, with member’s data.

Light vehicle exports

3 000 000 2 500 000 2 000 000 1 500 000 1 000 000 500 000 0 2006 2007 2008 2009 2010 2011 2012 2013 jan-aug 2013 jan-aug 2014

Production of vehicles and trucks

Production Value * 33,9% 36,1% 30,0% 66.1%

• 66.1% content of vehicle produced in Mexico is supplied or added domestically.

Imported National Intermediate demand Gross value added

Source: INEGI. Sistema de Cuentas Nacionales. Matriz de Insumo Producto. Matriz simétrica a precios básicos, 2008.

*

Production Value = Intermediate demand + Gross value added

Mexico IS the second major supplier of light vehicles for US market

• 11.1% of US domestic market is supplied with Mexican vehicles (January-august 2014) • Mexico is second vehicle supplier only after Canada, (January-august 2014).

Automotive Trade

• • • The automotive trade is positive, in 2013 it was 38.77 billion dollars.

In 2013 automotive exports were 1.7 times crude oil exports and 3.3 times of remittances.

The automotive trade was 4.5 times the oil products trade.  45 000  40 000  35 000  30 000  25 000  20 000  15 000  10 000  5 000 -

Automotive Trade*

Source: BANXICO.

* Automotive includes: 8702 Vehículos automóviles para el transporte => 10 personas; 8703 - Automóviles tipo turismo; 8704 - Vehículos para transporte de mercancías; 8706 - Chasises con motor; 8707 - Carrocerías; 8708 - Partes y accesorios de vehículos; y 8711 - Motocicletas.

11%

Remunerations

Manufacture industry Remunerations in the automotive industry are more than double those of the manufacturing factor.

Auto parts manufacture Automotive and trucks manufacture 9 354 12 162 21 582 5 000 10 000 15 000 Pesos per month 20 000 25 000

Source : INEGI. Censos económicos 2009.

* Las remuneraciones consideran el promedio de todo el personal ocupado incluido en nómina, incluye sueldos salarios y prestaciones.

When the OEM’s decide for their location of new investments … Why Mexico?

5 major elements that are making Mexico attractive for major investments

i.

ii.

Geographic Location.

Zero tariffs in major markets - Network of trade agreements with major regions around the world -.

iii.

iv.

Strength of the automotive supply chain.

Young and eager to learn human resources (technicians and engineers).

v.

Economic Stability.

…and very important: the Government is a major partner to help land investments!

… and the opportunity in the supply of auto parts.

Industry Location (T1 Suppliers) -

Illustrative -

Source: AMIA with INA’s data

Supply Capacity

Source: PROMEXICO. The Auto Parts Industry, Business Intelligence Unit.

Supply Capacity

Source: PROMEXICO. The Auto Parts Industry, Business Intelligence Unit.

Autoparts imports in United State

Mexico Canada Japan China Germany Korea Taiwan Italy India France Others 1 361 668 654 378 3 126 4 875 4 224 6 991 9 197 8 792 17 053 2013 2012 0 5 000 10 000

Million dolars

15 000 20 000

Source: Departamento de Comercio, Estados Unidos.

It is consider, 8708: Parts and accessories for tractors, public-transport passenger vehicles, motor cars, goods transport motor vehicles and special purpose motor vehicles

18

Market value and investment opportunity in the supply chain in Mexico

• • 71% of total demand for processes is imported, therefore, there are huge investment opportunities for foreign companies.

Some of the most demanded processes are stamping, casting, forging and machining.

PROMEXICO’s calculations.

Data in billions of dollars.

The opportunity described in the top ten supply processes for the automotive industry, which account for 85% of the opportunity identified by ProMéxico.

Source: PROMEXICO. The Auto Parts Industry, Business Intelligence Unit.

 1 400 000  1 200 000  1 000 000  800 000  600 000  400 000  200 000 -

Domestic yearly sales

Annualized sales

Source: AMIA, with member’s data.

Domestic market: similar countries

Argentina Brasil México 25 20 23 18 15 10 9 10 8 5 9 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: ACARA, AMIA, ANFAVEA, ANPACT, World Bank, IBGE, INEGI and INDEC.

Main Challenge: Domestic Market

Main reasons explaining the gap between sales and market potential:

•

Indiscriminate Import of used vehicles from USA

•

Little financing to promote vehicles sales

Imported used vehicles

1 600 000 1 400 000 1 200 000 1 000 000 800 000 600 000 400 000 200 000 0

Δ -16.2%

2005 2006 2007 2008 2009 2010

years

2011 2012 2013 jan-aug 2013 jan-aug 2014

Source: AMIA whit SAT data.

* Consider used vehicle imported on the border, pick ups and general vehicles.

Challenges and opportunities ahead

• Mexico will remain as an important world’s export base, manufacturing highly competitive vehicles.

• Auto parts industry will keep its place as a major exporter. However, local supply chain still needs to be strengthen (tier 2 and tier 3).

¡ T H A N K Y O U !

Eduardo J. Solís Sánchez

President Mexican Automotive Industry Association (55) 5272-1144 [email protected]