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Mexico Autos Report Q4 2011
Business Monitor International, Aug 2011, Pages: 64
Business Monitor International's 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.
Strong export and production growth domestically has helped Mexico move up to fourth position in BMI's Risk-Reward Ratings for the autos industry in the Americas this quarter, overtaking Argentina, which suffered because of its worsening regulatory environment in Argentina.
A strong rebound in the US – the largest export destination for Mexico-made vehicles – helped Mexican carmakers increase production 14% in H111, while increasing exposure to the Latin American markets give us optimism that the country is set for solid production-led growth in the future. This BMI believes will make Mexico well placed to achieve an average production growth of 7.7% y-o-y between 2011 and 2015.
A weak point, however, is that domestic demand remains lacklustre. After three consecutive years of contraction in vehicle demand between 2007 and 2009, Mexico witnessed a cautious 8.8% rise in 2010 and the recovery remains weak, with sales growing just over 11% y-o-y so far in 2011. With the bulk of new private sector credit still going to corporations rather than consumers, and remittances far off historic highs in nominal terms, at present there is little to like about the health of private consumption in Mexico. BMI accordingly forecasts sales growth of nearly 10.5% y-o-y by the end of 2011.
BMI's view that Mexico will be a significant outperformer in Latin American auto production between 2011 and 2015 has gained more support, with Nissan Motor planning to invest US$1.05bn in the country over the next three years. Nissan's announcement is particularly significant, given that the Japanese carmaker was the second largest auto producer in Mexico last year, behind General Motors Company, accounting for more than a fifth of total output.
Meanwhile, Honda's Mexican subsidiary Honda de México is looking to spend US$60mn on its El Salto facility in Jalisco from August 22 2011, according to Government Relations Director Ruben Resendiz. Honda's compatriot, Mazda Motor has joined forces with compatriot Sumitomo Corporation to set up a new production plant in Guanajuato state in Mexico by 2013. Mazda is hoping that the US$500mn project in Mexico will help it to establish a compact vehicle manufacturing hub in the cost effective production base in the Latin American region.
Despite the optimism, Mexico lags way behind Brazil in terms of scores and somehow managed to reach just above-average scores in the ratings, which is reflective of the ongoing weaknesses in its consumer demand story.
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