Covering the Industry's Economic, Legal & Financial Issues

MexicanAutomotive covers the Mexican automotive and auto parts industries, and is published monthly in English and Spanish. MexicanAutomotive reports on general Mexican automotive industry topics, as well as economic, financial and legal issues affecting the North American automotive industry. Published by Cacheaux, Cavazos & Newton (CCN), subscriptions to MexicanAutomotive are free. CCN is an international law firm with offices in Texas and Mexico. The firm provides legal services in many practice areas including Automotive law to clients doing business in the NAFTA region.

MexicanAutomotive.com | English
The First Automotive University in Mexico E-mail

The automotive industry is so important in Mexico that the country’s first automotive university is set to be constructed in Queretaro, a major city located two and a half hours north of Mexico City. Mr. Jose Eduardo Calzada Rovirosa, Queretaro’s current governor, announced that the new academic project is 70% complete, and that such facility hopes to begin operating in September of this year. The university will have the capacity to host 1,000 students. It will be located on an approximate one acre site and will have eight laboratories and 16 classrooms. According to Governor Calzada Rovirosa, in September the new automotive university plans to open with an inaugural class of between 30 and 50 students during its first phase, at a cost of 30 million pesos (approximately 2.5 million dollars). He also stated that the new university will launch an information campaign directed at young students who are interested in the automotive industry, which will include the various academic disciplines and programs currently demanded in the labor market. The Automotive University of Queretaro is being constructed in the municipality of El Marques, which neighbors the city of Queretaro. The law firm of Cacheaux, Cavazos & Newton, which produces this publication, has had an office in the city of Queretaro for many years, in a city that will continue to be important for the automotive industry and the creation of new business resulting from this new academic center.

 
The Nissan Leaf (100% Electric) on Sale in Mexico E-mail

 

Nissan became the first automaker to offer a 100% electric vehicle for sale in Mexico. Such vehicle appears to be the automobile of the future. To date, more than 115,000 units have been sold throughout the world. With this, Nissan confirms its position as a market leader in the production of electric vehicles. It also confirms the company’s commitment to promote zero emissions as it plans to open charging stations throughout Mexico’s territory. The presale of these electric vehicles has already started, and it is expected that the Nissan Leaf will arrive in the marketplace around the end of June or beginning of July. The model to be sold in Mexico will be unique and some of its features include the addition of an electric piece that would allow charging to occur immediately after drivers decelerate, as well as a fast-charging port which will allow for 80% of the battery to be charged in only 30 minutes. The new model has leather seats, a touch-screen display and many other features. The reaction of drivers testing electric vehicles has been interesting. In addition to being enjoyable, and non-contaminating, the almost total silence of the driving experience has been fascinating to many drivers. As previously published in MexicanAutomotive™, Nissan and the state of Morelos have created the first electric automobile corridor in Latin America, which is located between Mexico City and Cuernavaca. Additional plans to develop recharge zones throughout Mexico City are pending, which would be located in the Roma, Del Valle, Coyoacan, Polanco, Santa Fe, Satelite, Altavista and San Angel neighborhoods. In addition to Nissan’s plans to make its electric vehicles match the needs of consumers, such vehicles must also be reliable. Jorge Vallejo, Director of External Relations for Nissan Mexico, Latin America and the Caribbean stated that the company understands the anxiety that could result when a driver of an electric vehicle is unable to locate charging infrastructure in a given city, making it even more important for each driver to be able to charge their vehicle at home.

 
Production of South Korean (KIA) Autos in Mexico E-mail

The South Korean automaker KIA Motors has announced plans to construct a plant in Mexico, according to two sources familiar with the proposed project. If the plan goes forward, this will be KIA’s first manufacturing plant in Mexico. Production would begin approximately 21 months after initiating construction, according to such sources. The plant would be constructed in the city of Monterrey, Nuevo Leon. According to sources, the new plant would have a capacity of 300,000 vehicles per year, and two separate compact vehicles would be produced initially. It is thought that the construction of KIA’s plant in the industrial city of Monterrey, just two hours from the U.S. border, would assist the automaker with meeting demand in the United States, where KIA operates its only North American plant at full capacity in West Point, Georgia. This information is not yet official, and sources indicate that final plans have not yet been made public. Final confirmation from the South Korean company will need to come from Chung Mong-koo, the president of Hyundai Motors and its affiliate KIA. It has also been rumored that KIA desires to avoid expanding too quickly to avoid quality control problems that have affected its Japanese rival Toyota Motor Corp., when such latter company grew rapidly during the decade of 2000-2010. If this new project is confirmed, it would be excellent news for Mexico’s automotive industry.

 
The Problem of Importing Used Vehicles into Mexico is Close to Resolution E-mail

The importation of used vehicles from the United States and Canada to Mexico has created a problem for the Mexican domestic automotive industry, which surely contributes to the lack of growth and dynamism in the Mexican domestic vehicle market. The Mexican Automotive Industry Association (AMIA), the principal trade group of the Mexican auto industry’s largest players, is focused on addressing this issue in the legal arena through the filing of various legal appeals against the “Decree regulating the permanent importation of used vehicles,” the application of which has been extended through December 31, 2014. In case the planned appeals are rejected, such will create binding legal precedent (considered to be five consecutive court decisions on the same issue) and lead to pending lawsuits filed by importers to be resolved against Mexican used vehicle sellers. Since 2005, according to the AMIA, 7.3 million used vehicles have been imported into Mexico from the United States and Canada. Ninety percent of such imports have been made under the terms of legal injunctions issued by Mexico’s federal courts. The results of all these used vehicle imports are clear: the importation of a surplus of used vehicles, which has affected the sale of new automobiles in Mexico and, in addition, impeded the modernization of Mexico’s vehicular fleet. This phenomenon is known colloquially as the “Junkification” of Mexico’s automotive stock. According to experts, Mexican domestic vehicles sales should be in the range of 800,000 – 2 million vehicles per year. This would create 300,000 new jobs. According to data from the AMIA, 2014 domestic vehicles sales are projected to be just over one million units. Over the first three months of 2014, domestic auto sales totaled 251,124 units, while imported vehicles totaled 139,159, which represent 55.4% of the total number of new vehicles sold. As one can observe in previous editions of MexicanAutomotive™, the number of used autos imported into Mexico during the month of March, 2014 reached 46,559 units, which is equivalent to 55.4% of the total of new vehicles sold during such month. The number of vehicles imported decreased slightly over the prior year, when 13,811 fewer foreign autos were imported into Mexico.

The light vehicle category is not the only area to suffer from the importation of used vehicles into Mexico. During 2013, 19,800 heavy vehicles were imported into Mexico from the United States, which represents an increase of 70% over used heavy vehicles imported during 2012, which contrasts with the 4.7% decrease of heavy truck vehicles produced and sold in Mexico during the same year.

 
Automotive Investments in Mexico E-mail

Over the last four years the most important foreign direct investments in Mexico’s automotive industry have been the following:

Nissan 2 billion dollars

Audi 2 billion dollars

Honda 1.27 billion dollars

Mazda 770 million dollars

Other investments pending confirmation include:

Kia 1.5 billion dollars

BMW 1 billion dollars

Toyota 1 billion dollars

 
Automotive Statistics E-mail

Domestic Market:

· During the month of May 2014, 88,244 light vehicles were sold in Mexico, representing a 0.8% increase over the same month in 2013.

· For the January–May period, 416,233 vehicles were sold in Mexico, reflecting a decrease of 0.5% over the same five month period in 2013.

· Sales of new domestic vehicles in Mexico were comprised of 36.9% of units produced in Mexico and 53.1% originating abroad. Of such foreign units, the U.S. produced 11.8%, Japan produced 9.3%, South Korea produced 7.2%, Brazil produced 5.2%, and Germany produced 4.8%, while the remaining 14.8% of vehicles were produced in other foreign countries.

The year 2014 has shown what is, in essence, a stagnation in the growth of Mexico’s domestic automotive sales market. The chief indicator of such stagnation is the sale of new vehicles per 1,000 citizens. Over the past ten years, this number has actually decreased in Mexico. On the other hand, Mexico’s natural automotive competitors Brazil and Argentina have roughly doubled the number of units sold per 1,000 citizens. The flat level of growth in the domestic sale of new autos, while steady, shows the existence of a domestic market that is, in many ways, stalled.

 
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