The manufacturing sector and automotive exports from Mexico

The competitiveness of Mexico‘s manufacturing sector has been reflected in the growth of Mexican automotive exports.

After falling at a year-on-year rate of 16.8% in 2020, affected by the Covid-19 pandemic, the automotive industry’s external sales from Mexico rose three years in a row at double-digit rates.

What was the sequence? They first grew 13.8% in 2021, then advanced 18.2% in 2022 and finally increased 14.3% in 2023.

Among the strengths of the Mexican automotive industry are the following:

  • Attractiveness of Mexico due to the relocation strategy to sell in the North American market.
  • Skilled labor force.
  • Higher regional content required by the Treaty between Mexico, the United States and Canada (USMCA) to avoid paying tariffs in automotive trade.
  • Availability of domestic inputs, such as steel.
  • A highly competitive auto parts industry.
  • Location and logistics.
  • Trade agreements.

Manufacturing sector

So far, the growth of automotive exports from Mexico has been maintained at double-digit year-on-year rates: from January to April 2024 they increased 10.4%, to 61.881 billion dollars, according to Inegi data.

Macquarie Asset Management Mexico believes that the Mexican manufacturing sector remains highly competitive due to relatively low costs combined with high productivity, especially compared to other large emerging economies such as China, India and Brazil

In general, relocation gives Mexican-based manufacturing companies a significant advantage over Asian manufacturers for goods traded in the U.S. market.

Rules of origin

The Mexican industrial sector has access to the U.S. and Canadian markets through the USMCA, and to other major economic regions and trading blocs through other free trade agreements. 

Mexico has privileged conditions to host a competitive and innovative manufacturing sector and its favorable geographic location provides a competitive logistical base to reach all major markets.

In the production of automobiles, the USMCA increases the Regional Value Content (RVC) from 62.5% to 75%, with a new methodology. 

Industrial parks in the manufacturing sector

In the long term, Macquarie Asset Management Mexico expects an increase in demand for industrial space in different markets from emerging industries such as logistics and distribution-based e-commerce, electronics and medical equipment manufacturing.