Mexican car exports in September 2023 decreased by 12% compared to the previous year, marking the largest decline of 2023 in the statistics of the Mexican Statistics Office (INEGI). This decrease is primarily attributed to U.S. tariff policies, the largest market for Mexico's automotive industry.
Impact of Tariffs on the Automotive Industry
While monthly car production also faced a 15% decline, domestic sales experienced an 8% increase, which is considered a supportive factor for the key automotive manufacturing industry. Despite ongoing negotiations regarding the U.S. free trade agreement, Mexico still faces 25% tariffs on its cars to the United States. Mexican officials have estimated that compliance with regulations regarding the use of North American produced parts could reduce the tariff burden to 10% to 12%.
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Challenges Facing Manufacturers
Over the past three decades, the economies of the United States and Mexico have become heavily interdependent, but sudden changes in policies and tariffs under the previous U.S. administration have weakened business owners' trust in old supply chains. Janet Quiroz, an economic analysis manager at Monex, has warned that Mexico's dependence on the U.S. market is the biggest risk for this industry. She also stated that the September data is seen more as a warning sign than a crisis signal.
General Motors announced last year that it intends to invest $4 billion to shift part of its production to the United States. Meanwhile, other companies like Kia, BMW, and Mazda managed to increase their exports despite the decline in September.
The main automotive union in Mexico, AMIA, emphasized in a press conference on Wednesday that Mexico remains the largest foreign supplier of cars to the United States, supplying 16% of light vehicles to this market. Despite a 5% decrease in exports to the United States in the first nine months of 2023, exports to Canada, Mexico's second-largest market, have seen an increase of over 9%.
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