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Mexico Autos Report Q4 2010
Business Monitor International, Aug 2010, Pages: 61
The Mexico Autos Report provides industry professionals and strategists, corporate analysts, auto associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Mexico's automotive industry.
Mexico has inched nearer to becoming Latin America’s largest vehicle market, Brazil, in the publishers Business Environment Rankings for the auto industry in the Americas this quarter, supporting the publishers view that the country will continue emerging as an important auto hub in the region. However, a key factor driving recovery for Mexico’s auto exports and hence production will be the increasing diversification of export destinations.
Not only do we expect carmakers to gear an increasing proportion of their exports to Latin America, but also to markets outside the Americas. Japanese carmaker Nissan Motor’s Mexican subsidiary plans to kick-start its diversification strategy by exporting close to 20,000 Tiida sedan and hatchback cars to the Middle East from as early as this year and we expect more carmakers to follow suit. After a moderate recovery in auto production, to a growth of 15% y-o-y, to just over 1.8mn units by the end of this year, we expect Mexico to grow at an average 9.3% y-o-y between 2011 and 2014, to 2.59mn units – marking an almost 50% increase compared with 2009.
Prospects for domestic demand are less optimistic though. Domestic demand only managed to register its first quarterly sales growth in Q210, taking the end of H110 auto sales only 7.7% higher compared with the same period last year, at 370,967 units. Mindful of this, the Mexican government is therefore stepping up efforts to promote domestic vehicle sales. On top of forcing banks to increase lending to car buyers, it is abolishing the over 40-year-old tax on new car purchases – tenencia – in the hope of kick-starting a recovery in sales.
However, the publisher remains sceptical and continues to hold its forecast for sales of 834,000 vehicles by the end of the year, a rise of just over 6% y-o-y. The report continues to stress that improved vehicle finance offers the best possible support for a recovery in sales.
Supporting our view that Mexico will continue to emerge as a production hub, BMW is looking to triple its parts purchases from Mexico by 2012. More evidence of the growing confidence in Mexicomade components came to light in October last year when Volkswagen de Mexico revealed it was looking to increase its local supplier chain. The publisher points out that although the supplier segment in Mexico has historically been under-developed to meet international specifications and quality standards, the increasing presence of leading global brands is helping a globally competent industry emergence.
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