Mexico will attract record FDI in auto parts in 2022, manufacturers predict

The advance is motivated by the new rules that contemplate a greater regional automotive content in the T-MEC and by the promotion of the relocation of manufacturing to Mexico; new investments point to electromobility, highlights the industry

The auto parts industry anticipates that by the end of this year a record amount of investments of 4,000 million dollars will have arrived in the country amid the phenomenon of investment relocation (nearshoring) and the competitive advantages offered by the T-MEC, which will It will allow Mexico to take a leap towards manufacturing focused on electromobility.

Francisco González Díaz, president of the National Auto Parts Industry (INA) specified that the arrival of capital responds to the demand of the North American market (United States and Canada) for the transition in the production of combustion cars to electric ones.

Within the framework of the 20th edition of the International Congress of the Automotive Industry in Mexico (CIIAM), González Díaz reported: “the companies that are arriving are strongly focused on electromobility.”

The investments are promising, he added in an interview, since suppliers from India, Malaysia and Vietnam are settling in, as well as from China. although, he added, European capitals also stand out, as part of the increase in value in regional content stipulated in the Treaty between Mexico, the United States and Canada T-MEC. That has helped and many have to come here, the world is being regionalized and that means that they come to produce in Mexico”, he said.

The T-MEC, which entered into force on July 1, 2020, included a series of changes in the rules of origin for the automotive sector. The agreement requires that 75% of a vehicle’s contents (70% in the case of heavy trucks) be produced in North America, with basic car parts coming from the United States, Canada or Mexico.

After an introduction period that will end in 2023 for vehicles and in 2027 for trucks, only goods that meet these requirements will have duty-free access.

The president of the INA recalled that, since the start of the North American Free Trade Agreement (NAFTA), the industry attracted investments of 1,000 million dollars each year, an amount that rose to an average of 2,500 million dollars “and this year we hope it will be 4,000 million”.

From 2017 to 2021, Mexico received an average of 3,015 million dollars per year of Foreign Direct Investment in the auto parts sector and in 2021 the figure was 3,552 million dollars, so the advance to 4,000 million dollars would imply an increase of 12.6%, according to data from the Ministry of Economy.

Production, not just tangible

When we talk about auto parts, we think of the physical, of the metal part in a plastic or rubber, but also, it comes in software development and technology that comes after it, the technology that is required for an electric car is very broad”. Also, he said, fluids are required, new components to connect the battery and aluminum, not just lithium.

According to the INA, the composition of a battery barely has 8% lithium, but there are many factors that are being integrated and many materials that Mexico knows how to handle, that is why they are coming to Mexico for the variety of elements and parts that exist.

The Mexican auto parts sector is very competitive, he highlighted, ranking as the fourth largest producer of products, so that given the environmental commitment assumed by the government of Andrés Manuel López Obrador within the framework of COP27 to reduce gas emissions by 35% greenhouse effect by 2030, the National Auto Parts Industry (INA) raised its hand to collaborate with the authorities.

Francisco González affirmed that to the extent that electric vehicles have greater penetration in the market, auto parts manufacturers “we are preparing to take advantage of new opportunities.”

In addition, the industry not only supplies OEMs (Original Equipment Manufacturers), but also supplies the auto aftermarket sector, which is forecast to be worth $31.5 billion by 2024, and is currently around $31.5 billion. the 28,000 million.

According to projections from the United States Department of Commerce, the production and exports of auto parts from Mexico outline record levels in 2022.

For both indicators, it forecasts interannual growth of 6.9%, with which production would total 101.2 billion dollars, while exports would add 83.9 billion. (with information from Roberto Morales).