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Mexico to increase its automotive production: federal government

Mexico will increase its automotive production in the second half of 2022, predicted the federal government, in the General Economic Policy Criteria 2023.

For the second half of 2022, the Ministry of Finance considers that the following elements, among others, will explain the performance of Mexican foreign trade.

On the one hand, it is expected that logistical problems and maritime transportation costs in global value chains will dissipate and, with this, greater trade flows will be achieved, particularly in some manufacturing sectors such as the automotive sector.

In addition, demand for Mexican products will continue to be strong in the United States, despite a possible slowdown in some sectors of its economy, excluding the industrial sector.

On the other hand, lower commodity prices expected for the remainder of the year will have a favorable impact on the volume of exports and will also allow domestic demand for international products to continue.

Automotive production

Although the United States, Mexico’s main trading partner, has shown signs of economic slowdown, there is still no convincing evidence of a recession.

This was mainly due to the strength of industrial production, the labor market and the growth of private consumption in the first half of the year.

In particular, the country’s industrial production continued to grow in July with an advance in manufacturing, caused by higher automotive production and good dynamism in the aerospace, clothing and plastics sectors.

If this dynamism continues at the end of the year, annual growth in industrial production would reach 4.2%, in line with what the analysts’ consensus anticipated in August.

The manufacture of transportation equipment also advanced 8.1% in the first half of the year, with the production of auto parts standing out.

For the second half of the year, this sub-sector will maintain its positive trend, as there have been fewer days of shutdown in the country’s automotive plants, as a result of the shortage of semiconductors, as well as the expectation that the consumption of durable goods in the United States will show a good pace.

Production plants

Mexico is considered one of the countries with the greatest competitive and comparative advantages for foreign investment.

First, because of its strategic location and its network of more than 14 free trade agreements with 50 countries.

Second, because of its industrial development, such as in the transportation equipment sector, with a highly qualified labor force.

In this sense, the automotive industry is converting some of its plants to manufacture light vehicles and electric trucks to meet domestic and international demand.

In this sense, the incentives in the United States to consume electric vehicles will be beneficial for Mexico since they will also apply to those assembled in the country. This will allow domestic and foreign investment to continue to grow in the sector during 2023.

 

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