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Research and Analysis: Alejandro Pulido Morn Design and Layout: Gibran Quiroga 2013, ProMexico Camino a Santa Teresa No.1679 Col. Jardines del Pedregal Del. lvaro Obregn, 01900, Mexico D.F.
First edition (not for commercial sale) Mexico City, June 2013
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Contents
1. Introduction................................................................................................................................................... 2 1.1 Objective............................................................................................................................................................................................. 2 1.2 Whats New........................................................................................................................................................................................ 2 2. Industry Overview......................................................................................................................................... 4 2.1 Segmentation .................................................................................................................................................................................... 4 2.1 Global Key Indicators for 2012........................................................................................................................................................ 5 2.2 Mexican Key Indicators 2012.......................................................................................................................................................... 5 3. Global Outlook............................................................................................................................................. 7 3.1Production. ........................................................................................................................................................................................... 7 3.1.1 Light vehicles........................................................................................................................................... 7 3.1.2 Heavy vehicles.......................................................................................................................................... 7 3.2 Consumption. ..................................................................................................................................................................................... 7 3.3 Geographic Segmentation................................................................................................................................................................ 8 3.4 Industry Trends.................................................................................................................................................................................. 8 3.4.1 Strategic alliances..................................................................................................................................... 8 3.4.2 Major Role of Emerging Countries. ......................................................................................................... 8 3.4.3 Eco-friendly vehicles................................................................................................................................ 9 3.4.4 International presence of assemblers. ........................................................................................................ 9 3.5 Leading World Companies............................................................................................................................................................10 4. The Industry in Mexico. ............................................................................................................................... 14 4.1 Production. ........................................................................................................................................................................................14 4.2 Consumption. ...................................................................................................................................................................................16 4.3 International Trade. ..........................................................................................................................................................................17 4.3.1 Light Vehicles. ........................................................................................................................................ 17 4.3.2 Mexicos consolidation as fourth largest exporter internationally........................................................... 17 4.3.3 Heavy vehicles........................................................................................................................................ 18 4.4 Foreign Direct Investment..............................................................................................................................................................18 4.4.1 Mexico: A Proven Investment Destination............................................................................................ 18 4.5 International Companies in Mexico. .............................................................................................................................................19 4.6 Jobs.....................................................................................................................................................................................................21 4.7 Chambers and Associations. ...........................................................................................................................................................21 4.8 Automotive Engineering and Design Centers............................................................................................................................21 4.9 Other Relevant Initiatives in Automotive Engineering and Design. ........................................................................................24 4.10 Mexico: Consolidation in the International Automotive Industry. .........................................................................................24 5. Export Business Case.................................................................................................................................. 27 6. Investment Business Case.................................................................................................................................................................29 7. Legal Framework......................................................................................................................................... 31 7.1 PROSEC, Regla Octava, IMMEX and Drawback for the Automotive Industry. ................................................................31 7.2 Automotive Decree. .........................................................................................................................................................................31 7.3 International Standards and Certifications...................................................................................................................................31 8. Market Access............................................................................................................................................. 34 9. Future Trends on Employment and Design Centers................................................................................... 36 10. Conclusions............................................................................................................................................... 38
I Introduction
1. Introduction
1.1 Objective
The purpose of this document is to provide an overview of the domestic and international vehicle manufacturing industry, as a tool to identify the business opportunities offered by the industry in Mexico. The study includes a reference framework with some key indicators, at both the international and domestic level, including the following: production, sales, major trends, consumption, trade, investment and regulations, among other topics. It paints the landscape of the domestic industry, focusing on market, trade, existing clusters, chambers and associations, programs and the current legal framework. The document includes information aimed to help identify Mexico as a great destination for foreign investment and define its exporting potential.
II Industry Overview
2. Industry Overview
The automotive industry is constituted by two sectors: terminal and auto parts. This study will focus on activities carried out by vehicle manufacturers. Light commercial vehicles: motor vehicles used to transport goods and passengers; the category includes pick-ups, SUVs, minivans and panel trucks. Heavy vehicles: also known as commercial vehicles, they include light commercial vehicles, heavy trucks and buses. Heavy trucks: vehicles used for goods transportation. Their weight is over 7 tons. Buses: vehicles used to transport more than eight passengers, with a capacity of over 7 tons.
2.1 Segmentation
On an international level, the terminal industry typically divides the production of automotive vehicles into two segments: light and heavy vehicles. This study will use the following definition based on the Mexican industry: Light vehicles: passenger vehicles; those motor vehicles used for passenger transportation, and comprising no more than eight seats (including driver).
The gap in vehicle production between Mexico (8th) and Brazil (7th) diminished from 715,863 units in 2011 to 319,670 units in 2012.
Rest of the worlds share in production 1% Main producing countries2 China, United States and Japan 3%
th
Mexicos global ranking as vehicle manufacture4 3.02 million vehicles Global producer of light vehicles5 2.88 million vehicles
th
th
Share of the automotive industry as % of the GDP 20119 4% Share of the automotive industry as % of the manufacturing GDP 2011 9 20% Share of the automotive industry in total exports6 27%
4. Source: OICA 5. Source: AMIA 10. Source: Ministry of Economy
th
Mexicos global ranking as heavy vehicle producer7 138,078 vehicles Exporter of heavy vehicles7 104,155 vehicles
to
1. Source: Marketline, estimates 2. Source: ProMexico with data by OICA 3. Source: Fortune Global 500, 2012 6. Source: ProMexico with data by Global Trade Atlas. 7. Source: ANPACT. 8. Source: ANPACT 9. Source: INEGI
3. Global Outlook
In 2012, China ratified the size of its market and production internationally by becoming the leading producer in the industry, surpassing the United States and Japan.11 According to OICAs ranking of forty countries and based on their vehicle production, Mexico maintained its eighth position among the leading manufacturers worldwide, above countries such as Spain, France, Russia, the United Kingdom and Belgium. Table 1 Top Ten Manufacturing countries (million units)
2009 1 2 3 4 5 6 7 8 9 10 China 13.8 Japan 7.9 USA 5.7 Germany 5.2 South Korea 3.5 Brazil 3.2 India 2.6 Espaa 2.1 France 2.0 Mexico 1.6 2010 China 18.2 Japan 9.6 USA 7.7 Germany 5.9 South Korea 4.2 India 3.5 Brazil 3.3 Espaa 2.3 Mexico 2.3 France 2.2 2011 China 18.8 USA 8.6 Japan 8.3 Germany 6.3 South Korea 4.6 India 3.9 Brazil 3.4 Mexico 2.6 2012 China 19.2 USA 10.3 Japan 9.9 Germany 5.6 South Korea 4.5 India 4.1 Brazil 3.3
3.1.1 Light vehicles In 2012, the light vehicle production reached a total value of 1,222 billion dollars or 80,055,578 vehicles produced. This represented a 22.4% growth in value compared to the previous year. Estimates indicate that in 2016 light vehicle production will reach 95 million vehicles, a 19.9% growth from 2011 to 2016, with a total value of 1,582 billion dollars. 3.1.2 Heavy vehicles With regard to the heavy vehicle segment, in 2012 production reached 4,085,631 units, or 211.5 billion dollars, with a 4.3% increase compared to 2011. Estimates indicate that in 2016 production of light vehicles will reach 289.7 billion dollars, with an estimated growth of 36.9% compared to 2012.
3.2 Consumption
In 2012, sales of light vehicles were estimated at 1,426 billion dollars12, or a 9.2% increase compared to 2011. Estimates indicate that by 2016 sales of light vehicles will reach 2,153 billion dollar, increasing 51.5% from its value of 2012. Graph 2 Light Vehicle Sales At International Level (MD) 2011-2016
Source: OICA ** The ranking is based on production recorded by OICA; there may be differences with units produced in Mexico according to AMIA (Mexican Association of the Automotive Industry).
The gap in vehicle production between Mexico (8th) and Brazil (7th) decreased from 715,863 units in 2011 to 319,670 units in 2012.
3.1Production
The vehicle manufacturing segment accounts for close to 73.1% of the automotive industrys total production. Graph 1 Share Of The Automotive Sector Based On Production In 2012
Source: ProMxico with data by MarketLine
Autoparts
26.9%
73.1%
11. Source: ProMxico with data by OICA 12. Source: Global New Cars, Marketline December 2012
In 2012, the heavy vehicle segment recorded a value of 574.84 billion dollars,13 with a 5.4% growth compared to consumption for 2011. The heavy vehicle segment is expected to reach a value of 773.9 billion dollars by 2016. That is a 24.6% increase compared to 2012. Graph 3 Heavy Vehicle Sales At International Level (MD) 2011-2016
In the case of heavy vehicles, the region with the largest share in international sales was the Americas with 51.5%, followed by Asia-Pacific with 28.5%, the European Union with 16.9 and the rest of the world with 3.1%. Graph 5 Heavy Vehicle Sales By Region
Source: ProMxico with data by Marketline Source: ProMxico with data by MarketLine
Graph 6 Vehicle Production (Millions Of Units) 2006-2012 Currently, this type of car is being developed especially by Japanese manufacturers such as Honda and Toyota; in some countries buyers are being granted with subsidies to increase demand. Another example is the alliance between Ford and Toyota, announced in August 2011, to collaborate in the development of new hybrid pickup trucks and SUVs. The agreement seeks to further Toyotas hybrid technologies in the sports cars and trucks segments, where Ford has a vast experience. Electric Cars In recent years, in spite of their technological restrictions, electric cars have found a market niche due to their economy and zero emissions. They are beginning to grow, especially in Europe, where public charging networks and road tax exemptions are already in place in cities such as London and Paris. The main disadvantage of these cars is their limited autonomy, making them unattractive for long trips. However, they have found a wide market among urban users and the industry is working on new generations of quick charge batteries and extended autonomy. Hydrogen Engine Cars Hydrogen is an abundant and cheap fuel that is part of future vehicle trends. Regardless of its current and significant disadvantages, especially in terms of storage, some manufacturers continue to investigate the potential of hydrogen fueled engines. Not only car manufacturers, but also countries such as Norway, have infrastructure and research efforts for new hydrogen fueled vehicles. On its first attempt, Mazda now has the RX8, a car equipped with an engine that runs on both hydrogen and gasoline. 3.4.4 International presence of assemblers OEMs have shown three well-defined trends. First, in emerging countries such as China, India and Brazil, they have determined several capacities for local design and engineering, as well as regional offices. Secondly, these companies have established themselves in medium-sized countries which have the scale and purchasing power required to support vehicle assembly virtually without modifying production, and work as final assembly centers for wider regions as well. Finally, OEMs have also established in developing countries that are geographically close to large markets in developed countries and regional trade blocks, such as Mexico in NAFTA.
This trend is sustained by the size of the domestic market of emerging countries, which have recorded significant increases in purchases of new vehicles as the per capita GDP of their citizens increases. Even several assembly companies have started to invest in designing and producing models to satisfy these customers needs, offering higher mobility and reasonable prices, at times even using these countries as production platforms for industrialized countries. 3.4.3 Eco-friendly vehicles Diesel Engines This major trend is led by the German manufacturers, especially the Volkswagen group. The special features offered by diesel engines will focus on design, with small size and reduced cylinder capacity compared to current designs. With these features, new models deliver more power curves and less consumption than the actual engines. To increase power and performance in engines, they use elements such as turbo compressors and direct injection systems. The foregoing has resulted in an increasingly frequent use of four cylinder engines, which are now being seen in Premium cars, such as Mercedes Benz or Audi. Hybrid Cars A hybrid car uses a mix of two propulsion systems. A traditional system that is based on a combustion engine and a parallel system that is based on one or more electric engines that are fed by batteries and result in lower fuel consumption and emissions, because, especially in urban areas, the electric mode enables drivers to travel without having to use the combustion engine or combining both engines to increase power.
yota, Lexus, Hino and Daihatsu. Meanwhile, in Japan the company sells its luxury cars under the Crown and Century brands. Toyotas mass production hybrid car is the Prius.
According to Fortune Global magazine for 2012, Toyota is ranked 10th of the 500 largest companies in the world and first among Japans largest companies. General Motors General Motors is an American company located in Detroit, Michigan, that focuses on the design, development, manufacturing and sale of cars. It has presence in 31 countries. In North America, the company sells the following brands: Buick, Cadillac, Chevrolet and GMC. Internationally, the company distributes Opel, GMC, Vaux-hall, Buick, Cadillac, Isuzu, Holden, Chevrolet and Daewoo. In 2009, as a result of the financial crisis, the US government acquired 61% of General Motors shares at an approximate price of 50 billion dollars. One of GMs main budgetary cuts to obtain federal funds, was to cease production and sales of the Pontiac brand vehicles, created in 1926 and sold in the United States, Canada and Mexico. In May 2013, the US government announced the sale of a new round of General Motors stock, which it had acquired during the financial rescue. The US Treasury plans to sell 214.7 million dollars in shares during a 12 to 15 month period. In May, the government held approximately 18% of the companys common stock and had recovered 94.6% of the financial rescue provided to General Motors. According to Fortune Global magazine for 2012, General Motors is ranked 19th among the 500 largest companies in the world and 8th among the largest companies in the US. Ford One of the leading car companies internationally, Ford is headquartered in Michigan in the United States. It designs, manufactures and distributes cars through more than 65 plants around the world and it has 171,000 employees. The companys brands are Ford and Lincoln, and it sells Motorcraft auto parts.
Ranking
Ranking
2012
Toyota
Volkswagen
Toyota
Volkswagen
Toyota
Volkswagen
Ford Daimler GM
GM Daimler Ford
GM Daimler Ford
Source: ProMxico with data by Fortune Global 500, 2012, 2011 y 2010
In 2011, Ford and General Motors recorded a drop in comparison to their previous ranking, due largely to the 2009 crisis. Ford was the only American company that did not receive financial aid, which left it exposed to remedy its finances after the crisis. Meanwhile, General Motors received aid from the government and was even the subject of corporate restructuring that resulted in the extinction of the Pontiac, Hummer and Saturn brands, and the sale of other brands such as Saab. Meanwhile, Toyota profited from car sales after having suffered the lack of supply that resulted from the tsunami that hit Japan in 2011. After this event, many companies that manufactured products in Japan began to diversify their operations around the world. Mexico and Brazil are just some of the countries that received these operations. The industry is expected to grow 42.4% by 2015, reaching 3.195 billion dollars. The industry has not recovered yet the income it had during 2007 that was of 2,374 million dollars. Toyota Currently the largest car manufacturer in the world, the company focuses on the design, manufacturing and sale of light vehicles, minivans and trucks. Toyota has more than 50 production plants in 26 countries. In the car segment, Toyotas business is divided into conventional engine vehicles and hybrid vehicles. Toyotas brands are To-
10
Chrysler Nissan The current Chrysler Group LLC was founded in 2009 as part of a strategic alliance with the Italian Fiat S.p.A. It is headquartered in Auburn Hills, Michigan. The group produces and sells cars under the Chrysler, Jeep, Dodge, Ram, SRT, Fiat and Mopar brands. As part of its industrial Alliance with Fiat, Chrysler also produces and sells Fiat vehicles for North America. Likewise, Chrysler sells Mopar auto parts. Approximately 10% of its vehicle sales in 2012 were outside North America, mainly Asia-Pacific, South America and Europe. Until 2007, Chrysler was part of Daimler-Chrysler, until it was sold to Cerberus Management LP. Chrysler was one of the most affected by the 2009 financial crisis. That year, the company went bankrupt and the US government contributed 6.6 billion dollars to help the company continue to pay its debts and begin its restructuring. In May 2011, Chrysler paid 7.6 billion dollars to the US and Canadian governments (5.9 billion and 1.7 billion dollars, respectively). The 2012 financial report shows that Fiat has 58.5% of the companys shares, and the remaining 41.5% is owned by the Voluntary Employee Beneficiary Association (VEBA) and is controlled by the Union of Auto Workers (UAW) of the United States. Volkswagen Globally, Volkswagen is recognized as one of the leading vehicle manufacturers. Its headquarters are located in Wolfsburg, Germany. Volkswagen Group has 100 production plants of which 50 are located in Europe; 28 in Germany, 17 in Eastern Europe, four in North America (one in the United States and three in Mexico), nine in South America (six in Brazil and three in Argentina), three in South Africa and 17 in Asia-Pacific (12 in China, four in India and one in Thailand). The group is constituted by 12 brands: Volkswagen, Audi, Skoda, Seat, Porsche, Bentley, Bugatti, Lamborghini, Ducati (motorcycles), Scania, MAN and Volkswagen Commercial Vehicles. Each of the brands operates as a separate entity. The group has approximately 550,000 employees. Volkswagen is ranked 12th among the 500 largest companies in the world, according to Fortune Global 500s ranking for 2012. In Germany, the company is ranked first Founded in 1933, the Japanese company produces and sells vehicles. It manufactures in 20 countries around the world and has more than 161,513 employees. Nissans manufacturing plants and R&D centers in the world are distributed as follows:
Region/ Country R&D Centers Design Centers Manufacturing Plants Education Centers
Japan USA Europe Asia Mexico, Latin America and the Caribbean Africa Oceania
7 2 1 4
-1 1 1
14 3 3 14
1 ----
--
--
--
---
---
3 1
---
In March 2012, the company announced it would bring back its Datsun model by 2014 in the Indian, Indonesian and Russian markets. It comprises the following brands: Nissan, Infiniti, Nissan Forklift and Nissan Marine. According to Fortune Global magazine for 2011, Nissan is ranked 48th among the 500 largest companies in the world, and 6th among Japans largest companies. Renault Renault is a French vehicle manufacturer and seller with strong presence in Europe. It has more than 127,086 employees worldwide, operating in 35 production plants, four accessories and parts distribution centers, three centers used as logistics platforms and one center for parts and vehicle preparation. Renault sells its vehicles under the Renault, Dacia and Renault Samsung Motors brands. According to Fortune Global magazine for 2012, the company is ranked 158th among the worlds largest companies, and 13th among Frances largest companies.
11
Nissan-Renault Alliance Founded in 1999, the Alliance between these assemblers was created with the goal of expanding and creating new projects and alliances internationally.
Goals for 2016 Sell 10 million units Put 1.5 million zero CO2 emission vehicles in circulation Earn average income of 9%
Source: Company information
Alliance has 3.1% of Daimlers shares, while Daimler acquired 3.1% of Renaults shares and 3.1% of Nissans. The following are actions that the Alliance has undertaken in emerging markets:
Situation in 2011 Sell 8 million vehicles The first year, 30,000 units were sold and combined they held 67% of the market Earned income of 8.4%
Nissan uses Renaults plant in Curitiba, Brazil, to have a presence in the Brazilian market. In Russia, both companies manufacture Renault, Nissan and Lada models in the AVTOVAZ plant in Togliatti. In India, they use a joint platform to produce the Nissan Micra-Renault Pulse and Nissan Sunny-Renault Scala models. Renault plans to invest with Nissan in a plant in Dongfeng, China.
Renault has 43.4% of Nissans shares, while Nissan has 15% of Renaults shares. According to the companies, having shared stock benefits the Alliance because it leads to a win-win strategy for both companies. Subsequently, in 2010, Daimler AG announced a collaboration agreement with the alliance to efficiently increase operations internationally. As part of the agreement, the Renault-Nissan
According to the company, Mexico is the eighth most important market for the Alliance, with 27.4% of the market share, ranking above the United Kingdom and Italy and ranking below China, the United States, Russia, France, Japan, Brazil and Germany.
Mexico is the eighth most important market for the Nissan-Renault Alliance, with 27.4% of market share, ranking above the United Kingdom and Italy.
12
13
Platina Sentra TIIDA Tsuru Long Estacas Diesel Pick up largo Long Chasis Long Chasis Diesel Long Estacas Long Pick up Diesel
CRV
Crewcab Journey RAM 1500 RAM 2500 RAM 3500 Fiat 500
Tacoma
Aveo Chevy G3 HHR Avalanche Captiva Sport Escalade GMC Sierra SRX SUV VUE
In terms of heavy vehicles, the OEMs have reached an important level of development in our country. They perform activities that range from assembly and stamping to bodywork producing a wide variety of models to satisfy the demand of the domestic and export markets. Currently, 11 heavy vehicle manufacturers and two engine manufacturers for this kind of vehicle have production facilities in Mexico. Table 4 Some Heavy Vehicles Produced In Mexico
DINA CAMIONES
2005 2006 2007 2008 2009 2010 2011 2012 2013f 2014f 2015f 2016f
/f Forecast Source: AMIA 2005-2012, Global Insight 2013-2016
Companies in the light vehicle terminal industry have 18 production complexes located in 11 Mexican states, where they perform activities that range from assembly and armoring, to casting and stamping of vehicles and engines. Currently, more than 48 car and light truck models are produced in Mexico.
ISUZU
SCANIA
Giant
Grupo Man Latin Amrica acquired VW Trucks and Buses in 2010, integrating MANs and VWs operations in Mexico.
15. Source: Mexican Association of the Automotive Industry (AMIA) 16. Source: Global Insight
14
DAIMLER (Freighter y Mercedez Benz) Trucks: M model Road trucks: Cascadia, C, F and G models Construction: M model Buses: Boxer, Torino and MBO model
INTERNATIONAL
KENWORTH
VOLKSWAGEN/ MAN*
VOLVO
Trucks: 4300 and 4400 model Road trucks: Prostar and 9200 model Construction: 7600 model Passenger chassis: 4700, 3000, 3100 and 3300 models
Trucks: T370, L700 and T800 models Road trucks: T800 and T660 models Construction: T460 and T800 models
Trucks: 8.150 and 9.150 models Passenger chassis: 8.150 and 9.150 models Buses : Lions Coach R07-464, Lions Top Coach R08-464 and A82.18.410 model
Sentra, Versa and March; Chevrolet Trax, Captiva and Silverado; Chrysler-Fiat Journey, Freemont and Fiat 500; Mazda 2 and 3; GM Sierra and Cadillac SRX; Hondas CR-V and Fit; Volkswagen Golf VII, Bettle and Jetta, among others.
Furthermore, anually Mexicos automotive industry manufacture 2.9 million engines. Graph 9 Top 5 Plants In North America
434,685 340,5613 41,237 371,694
Nissan Aguascalientes
313,327
2010
510,041
91.8 56.6
333,884 338,127 344,446 360,796
Hyundai Montgomery
Nissan Aguascalientes
477,150
Nissan Smyrna
2005 2006 2007 2008 2009 2010 2011 2012 2013f 2014f 2015f 2016f
F/Forecast Source: ANPACT 2005-2012, ProMxico with Business Monitor growth rates for 2013-2016
In addition to vehicle manufacturing, Mexico offers assemblers high manufacturing capacity, as well as design and production of models that comply with the highest quality standards and are sold in the markets with the highest demand. The following are a few examples:
2011
596,615 458,442 462,093
Nissan Aguascalientes
Toyota Georgetown
Mexico shifted from a simple manufacture exporting country to an innovation creator. There are more than 30 automotive design centers in the country. The evolution and relevance that Mexico has acquired in the automotive industry is supported by investments in new projects, such as manufacturing models made in Mexico, such as: Ford Fusion, Fiesta, and Lincoln MKZ; Nissan Note,
2012
Source: ProMxico with data by Autofacts PWC
15
Volkswagen Puebla
Honda Marysville
Two of the main light vehicle production plants in North America are Mexican: Volkswagen in Puebla and Nissan inAguascalientes. The first one was the plant with the largest production in the region, with 596,615 vehicles produced, and combined, both plants manufactured more than one million units in 2012.
412,284
Nissan Smyrna
Volkswagen Puebla
Volkswagen Puebla
Honda Marysville
In 2012, Mexico produced 138,078 heavy vehicles, ranking 7th internationally.17 Furthermore, according to information from the National Association of Bus, Truck and Tractor Producers (ANPACT), Mexico ranked as the 4th heavy vehicle exporter internationally.
Toyota Georgetown
4.2 Consumption
In 2012, more than 987,747 light vehicles were sold in Mexico, that is, a 9% increase compared to 2011. Business Monitor estimates that vehicle consumption in Mexico will record a 51.7% growth rate in the 2012-2017 period, placing sales at 1,498,950 units for the last year. Graph 10 Light Vehicles Sales In Mexico (Units) 2008-2017
1,248,965 1,362,820 1,498,950
It is estimated that heavy vehicle sales will reach 200 thousand units by 2017, with a 46% growth rate compared to the volume recorded in 2012.
905,886
987,747
1,074,713
1,154,419
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
F/Forecast Source: ProMxico with data by AMIA (2007-2012) and Business Monitor (20132017)
F/Forecast Source: ProMxico with data by ANPACT (2008-2012) and Business Monitor (20132017)
As for the domestic market, Nissan ranked first in terms of sales, with a 25% share, followed by General Motors with 19%, Volkswagen with 14%, Chrysler-Fiat with 9%, Ford with 8%, Toyota with 6% and Honda with 5%. These brands accounted for 85% of vehicles sold in Mexico. It is important to note that among vehicle producers in Latin America, Mexico recorded the highest growth in domestic consumption, showing huge exporting potential; however, it is still far from markets such as Brazil in terms of units sold. Table 5 Light Vehicle Sales In Latin America (units)
2011 Argentina Brazil Mexico Chile Colombia 883,351 3,425,739 905,886 334,052 210,053 2012 830,058 3,634,115 987,747 338,826 184,817 Annual Growth % -6.0% 6.1% 9.0% 1.4% 12.0%
Based on information by ANPACT, the segment with the largest sales volume in 2012 was trucks, which accounted for 43%, followed by tractor-trucks with 38%, chassis sales with 15% and buses with 3%. Graph 12 Segmentation of Heavy Vehicle Sales In Mexico
Source: ProMxico with data by ADEFA, ANFAVEA, ANAC, Econometra S.A. and AMIA
The Mexican automotive market has huge potential. Currently, sales levels have not exceeded the level of one million units that was recorded before the 2009 crisis. However, 2011 and 2012 consumption shows a gradual recovery in the domestic market. Heavy vehicles sales reached 39,465 units, or a 21.1% growth compared to 2011. However, sales are still lower than sales before the crisis, although the industry in general shows signs of a quick recovery.
The company with the highest sales was Kenworth, with 29.4%, followed by International with 21.3% and Freightliner with 17.7%. The three companies accounted for 68.3% of sales in Mexico in 2012.
16
Mexican imports of light vehicles increased by 4% in 2012, going from 430 thousand units to 446 thousand. The main areas of origin were: Tabla 8. Mexican Light Vehicle Imports
Origin Asia North America European Union Mercosur Total 2011 (units) 172,837 165,945 80,040 66,800 485,622
% Share
% Share
36 34 16 14 100
38 32 18 12 100
4.3.2 Mexicos consolidation as fourth largest exporter internationally The automotive industry in Mexico increased its relevance as vehicle exporter internationally. In 2010, Mexico ranked 5th, behind Japan, Germany, South Korea and Spain, with which there has a difference of 311,149 units. In 2011, Spain began to suffer the crisis that permeated to its production sector, while Mexico hit new production and export records and a new wave of investments by Japanese companies in the automotive industry. As a result, the gap between both countries dimished so that by late 2012, Mexico ranked fourth light vehicle exporter internationally, while Spain dropped to the 7th place. Graph 13 Main Light Vehicle Exporters (Millions Of Units)
17
In terms of the main locations throughout 2011, Japan suffered the effects of the earthquake and tsunami in March, which largely affected its vehicle production and led to Germany becoming the leader in light vehicle exports. However, Japan recovered its lead in 2012. 4.3.3 Heavy vehicles In 2012, Mexico exported 104,155 heavy vehicle units. That same year, Mexico was the leading heavy vehicle supplier to the United States in terms of value. Furthermore, Mexico had a 72% share in imports to the United States in this segment, surpassing Canada that year. Graph 14 Heavy Vehicle Exports And Imports (Units) 2007-2012
OEMs Industry
Source: RNIE Ministry of Economy
The main investor countries in Mexico in 2012 were Japan, with 60.1%, followed by the United States with 19.8%, Germany with 19.7% and France with 0.4%. The investments of the four Aforementioned countries accounted for total investments received in the terminal automotive sector. 4.4.1 Mexico : A Proven Investment Destination The renowned quality of Mexican automotive manufacturing has brought many assemblers to Mexico because it represents a unique manufacturing platform for all their markets. Therefore, many models sold around the world are produced exclusively in Mexican plants, such as the Ford Fusion, Lincoln MKZ and Volkswagen Beetle. Important investments and recent projects have arrived in Mexico, for example:
*Estimates Source: ProMxico with data by ANPACT
2007
2008
2009
2010
2011
2012
The main export segment in Mexico was tractor-trailers with 33.7%, followed by load trucks with 33.6%, passenger chassis with 0.65%18 and long distance buses with 0.1%.
Volkswagen Production of the Bicentennial car and the opening of a plant in the state of Guanajuato with a 550 million dollar investment. The plant will produce latest generation diesel engines for Puebla in Mexico and Chattanooga in the US. Furthermore, in January 2013, Volkswagen Puebla announced a 700 million dollar investment to adapt production lines in the Puebla plant, and acquire new tools for its suppliers. The purpose of adapting the plant is to produce the new Golf, which according to the company, will be sent to the North and South American markets. Ford Diesel engine plant in Chihuahua with an 800 million dollar investment. This will be the first time that the diesel engine is manufactured in the Americas with flexibility for available alternative fuel vehicles. Fiat/Chrysler Toluca is the only plant in North America that manufactures the Fiat 500 model to be sold across the Americas, in addition to being the only plant in the world to produce the Dodge Journey.
18. Car with chassis (two lengths) which will be fitted with bodywork, to transport more than ten passengers
18
Mazda Construction of a plant to manufacture vehicles and engines in the state of Guanajuato, with an investment of approximately 500 million dollars. Audi In 2012, this luxury assembler revealed its plans to build a new plant in San Jos, Chiapa, Puebla, which will produce the Q5 model as of 2016. In addition, Mexico is the leader in systems manufacturing, namely: electric parts, transmissions, clutches, engine parts and vehicle parts. For example: Pirelli Tire plant pioneer for the production of the Fiat Tyre in Silao, Guanajuato, with a 210 million dollar investment. Nissan-Jatco will invest 220 million dollars in a plant to manufacture continuous variable transmissions (CVT) for several car models, creating 200 new jobs in the state of Aguascalientes. Honda de Mexico announced in May 2013 an investment for a new plant in Celaya, Guanajuato, which will focus on transmission manufacturing. The plant will have an annual capacity of 350 thousand units with a plan to double its capacity in the future. Likewise, in recent years several large investments have been announced to develop larger capacities for the heavy vehicle industry. A few examples that have been gathered in this document are: Usui International Manufacturing, announced in 2012 a 10 million dollar investment in a plant in Guanajuato, to produce steel pipes for fuel, brake and general fluid systems for commercial and load vehicles and tractors. The plant will begin operating in late 2014. Daimler Vehculos Comerciales announced a 19.5 million dollar investment for 2013 to expand its plant in Garca, Nuevo Len. The investment will serve to expand its facilities and acquire devices, chassis and bodywork assembly tools for longdistance buses. Navistar-International announced in late 2012 that it would transfer its truck production operations from its plant in Garland, Texas, to its plant in Escobedo, Nuevo Len. According to information from the Heavy Duty Manufacturers Association (HDMA), the models manufactured in the Texas plant were the LoneStar, TranStar, WorkStar and PayStar, as well as other vehicles that will be produced in Springfield, Ohio.
Mexico shifted from a simple manufacture exporting country to an innovation creator. There are more than 30 automotive design centers in the country.
In the area of commercial vehicles, several companies have production facilities in Mexico, such as Daimler, Kenworth, Hino, Isuzu, Mercedes-Benz, Volvo, Man, etc. Table 9 Producing Companies Established In Mexico
Light vehicles General Motors Ford Chrysler/Fiat Nissan Honda Toyota Volkswagen BMW Mazda Commercial vehicles Daimler* Scania Volvo DINA Kenworth International Volkswagen/MAN GIANT Hino Motors Isuzu
* Freightliner and Mercedes Benz
Engines
Autoparts
Cummins
Detroit Diesel
Most of the assembly companies in Mexico have auto parts companies located around their vehicle plants to comply with supply and delivery deadlines. The leading assemblers of light and heavy vehicles are identified in the following maps.
19
Aguascalientes
Chihuahua
Salamanca
Celaya
SilaoG
uanajuato
Saltillo
Toluca
Toluca
Morelos
Puebla
20
According to Expansion 500 magazines ranking, in 2012 the leading companies in the automotive industry in Mexico, based on sales, were the following: Table 10 Sales By The Main Industry Players In Mexico
Top 500 Ranking Company Sales in millions of pesos Origin Jobs in Mexico
Mexican Association of the Automotive Industry (AMIA): Is a civil association comprised of vehicle manufacturing companies, which was founded in 1951. Its objective is to have exclusive representation for this industrial sector. It represents the ten major auto- makers in the country. It represents brands such as Dina, Isuzu, Mercedes-Benz, Kenworth, Daimler, Volvo, Volkswagen, Detroit Diesel, MAN, etc. National Association of Bus, Truck and TractorTrailer Producers(ANPACT): Since 1992 it represents the 13 heavy vehicle (more than 6,3 tons) and diesel engine manufacturers, and its goal is to promote the development of the Transportation Industry in Mexico.
8 10 13 16 18 83 84
102 106 114 209
159,356 135,500 130,267 112,682 105,000 24,800 24,300 20,348 19,282 17,633 7,175
USA USA Germany Japan USA Japan Japan USA USA Germany/ USA Japan
13,000 7,999 17,297 11,500 6,200 2,250 1,000 2,737 2,000 3,369 1,600
Nissan Mexicana Chrysler Mexico Honda de Mexico Toyota Motor Sales de Mexico Kenworth Mexicana Navistar International Daimler Mexico Mazda Motor de Mexico
4.6 Jobs
As of December 2012, 645,902 people were employed directly in the automotive sector: 62,196 in car and truck manufacturing and 583,706 in the auto parts sector. According to the National Statistics Institute (INEGI), average wages in the vehicle terminal industry in Mexico are double than the rest of the manufacturing industry19.
19. With information from May 2011, the INEGI reports average monthly salaries for the manufacturing sector of 8.77 thousand pesos per employee, compared to 17.81 thousand pesos in the terminal automotive industry. 20. General Motors corporate information, http://www.gm.com.mx/content_data/LAAM/MX/es/GMMGM/flash/corporate/_informacion/conozca/planta_centroregional.html 21. Information from various media (press).
21
Competitive Advantage Innovation and Development Center (CiDeVeC) The center belongs to Metalsa, a subsidiary of Grupo Proeza, a chassis manufacturer. The center is constituted by three areas. The first one focuses on designing new products and virtual testing to save costs. The second area performs material, resistance, wear, lightness and elasticity testing. The third area carries out tests on chassis. The center is located in the PIIT in Nuevo Len. Strategic Product Innovation and Development Center of the Tecnolgico de Monterrey (CIDEP) Its goal is to support new companies and develop prototypes of technology products, as well as to carry out the relevant tests that justify and determine their viability. The center has labs for reliability, metrology, anechoic chamber, exterior design prototyping, and other tests, and can develop manufacturing processes and numeric design simulations. It serves high technology companies in the micro-electronics, telecommunications and industrial design sectors in the state of Nuevo Len. Chryslers Automotive Research, Development and Engineering Testing Center22 Based in Mexico City, the purpose of this center is to develop and evaluate the new Dodge, Chrysler, Jeep, Mitsubishi and Hyundai vehicles. The center includes the following areas: Vehicle Testing, Labs to measure Pollutant Emissions, Materials and Metrology Engineering Labs, Engine and Transmission dynamometers. It provides direct jobs to 30 engineers specialized in process development and validation, in addition to any indirect jobs required by each project. At the center, world-class engineering tests are preformed, as well as studies of environmentally friendly raw materials and alternative fuel technologies, emission reduction and petroleum derived fuel consumption. The vehicle testing, research and development area occupies the largest space in the facilities. Its activities include processes to develop, review and test any type of operation: from changes to a part, to partial or total changes to chassis, engine, trans- mission, etc. The center uses up-to-date models, as well as potential vehicle concepts for launch in the future. Center for Research and Technical Assistance of the State of Queretaro (CIATEQ)23 Based in the city of Queretaro, this center was built with the participation of the federal government represented by Conacyt and LANFI, the government of the state of Queretaro and industrials from the state, headed by executives of Grupo ICA and Grupo SPICER.
CIATEQ performs technology development projects for the automotive and autoparts industry, from basic engineering to the manufacture of purpose machinery and equipment, tools, test benches, control and measurement systems, manufacturing of prototypes and development of specialized vehicles for airports:
Wind tunnel for car radiator testing Design and manufacture of thermo cycle test bench for the evaluation of charged-air coolers Mechanical design of the new ranges of seven models of agricultural tractors Design and manufacture of an aluminum mold for tractors Angle cutting machine for rubber profile Machine to inspect and laser mark engine rings Machine for car radiator thermo cycle testing Device to inspect the position of headlights Machine to test car tires Crane to assemble powertrain Machines for secondary operations in the production of door seals Drill for rubber extruding line
Zero gravity arm for suspension assembly line Analysis and simulation of automotive structures Machines to test truck dashboards (cluster) Template for welding the structure of car seats Assembly table for seat frames Measurement and verification devices for car window raisers Redesign of cooling systems, molds and auxiliary elements for the manufacture of aluminum auto parts Design and manufacture of cabin to apply waterbased paint Design and construction of a set of machines for secondary operations in the production of seals for car doors.
Vehicle Electronic Technology Center24 This is an initiative in Guadalajara that results from the agreement between the Technological Institute of Occident (ITESO) and the private company Soluciones Tecnolgicas. The center develops and integrates electronic systems for automotive applications, in the following areas:
Testing and systems integration services for testing modules and systems for assembly companies and their suppliers. Engineering, design and electronic systems integration services. Technology research and development in electronic systems.
The main users are OEMs and their suppliers that export products to North America and Europe; further users are the electronic component and automotive systems software developers and designers as well as universities and other research institutes related to cars, airplanes, boats, electronics and software, especially firmware.
22. Informacin corporativa Chrysler, http://www.chryslerdemexicoonline.com/company/ingenieria/index.htm 23. CONACYT, http://www.ciateq.mx/ 24. ITESO, http://portal.iteso.mx/portal/page/portal/ITESO/Informacion_Institucional/ITESO_Empresa/Centro_de_tecnologia_electronica_vehicular 25. Infomaquila, http://www.youtube.com/watch?v=-yy3kHIhbOM
22
Mexicalli
M P P P P
A
Academic Sector
A P P
Sonora
P
Distrito Federal
P G A P G A
Estado de Mxico
Private Sector
G
Public Sector
Aguascalientes
P A
M
Mixed Sector
A P
Jalisco
Quertaro Puebla
Michoacn
Delphi Technical Center25 Headquartered in Ciudad Jurez, Chihuahua, this component engineering center designs and develops products. It has close to three thousand employees of which close to one half are engineers and technicians. It has been operating for eight years and during that time has obtained 50 patents, 35 defense publications and eight industrial secrets based on components, systems and applications for the automotive sector Center for the Development of the Automotive Industry in Mexico (CEDIAM)25 The Center for the Development of the Automotive Industry in Mexico is an integrating center with national coverage that offers the automotive sector advise, training, research and technology development services. It was created with the support of various players such as companies, institutions, chambers and the government, with the goal of increasing information and reducing the gap between companies and boosting the national industry. It has more than 300 researchers, labs, equipment and a national coverage network. It has presence in Coahuila, Monterrey, the State of Mexico, Quertaro, Guanajuato, Jalisco, Puebla, Aguascalientes, Morelos, San Luis Potos and Sonora. Industrial Engineering and Development Center (CIDESI)27 The CIDESI was founded on March 9, 1984 and is part of the System of Centers of the National Science and Technology Council.
CIDESI is ISO-9001:2008 certified and is the first center of the Conacyt System that is AS9100 B certified as a supplier for the aviation industry. It was granted the National Technology Award in 2003 and the State Exportation Award of the State of Quertaro in 2004. It is a reliable supplier to PEMEX, and an authorized supplier to Bombardier, also is a member of the Alliance with National Instruments and the Texas Instruments Design House. This center contributes to the development of the countrys production sector with two main offices located in the states of Queretaro and Nuevo Leon inside the Monterrey Technology Research and Innovation Park. In addition, it has labs in San Luis Potos and in important companies in Mexico. Advanced Materials Research Center (CIMAV)28 The Advanced Materials Research Center (CIMAV) is an institution that is part of the National System of Public Centers Conacyt. It was founded in the city of Chihuahua in October 1994 and its creation is the result of an agreement between the Federal Government, the State Government of Chihuahua and Canacintra Chihuahua Chapter, which has given it special features that have positively affected its development It has highly specialized staff that do basic oriented and applied research as well as technology development with the goal of meeting the countrys scientific, technological and academic demand. All of which is based on eleven research lines and two institutional academic programs.
26. ITESM, http://www.itesm.mx/rzc/CeDIAM/cediam1/index.htm 27. CONACYT, http://cidesi.com/joomla/index.php 28. CONACYT, http://www.cimav.edu.mx/ 29. CONACYT, http://www.conacyt.mx/fondos/institucionales/Tecnologia/Avance/Paginas/Avance_AERIS.aspx 30. CLAUT, http://claut.com.mx/
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R&D in electric systems and components Technology development for HVAC New technologies applied to manufacturing Nuevo Len Automotive Cluster (CLAUT)30 The Nuevo Len Automotive Cluster is a civil association comprising tier 1 manufacturers of the automotive industry and related academic and government institutions. CLAUT seeks the development of the integrated chain from OEMs to tier 1, 2 and 3 suppliers, as well as others that support the automotive industry, such as logistics and consulting service companies, among others.
24
In recent years, the Mexican industry has shown a shift in trends, going from the maquila of automobiles towards the development of capacities for the integral production of vehicles for specific niches, such as Vehizero and Mastretta. Vehizero The company was created in July 1999 by Sean OHea, an engineer who worked on the project to assemble zero emission units, supported by the National Autonomous University of Mexico (UNAM), the Universidad Iberoamericana and advice from Harvard experts. Since 2006, the company manufactures, designs, develops and assembles prototypes of hybrid units and vehicles In early 2008, the Aguascalientes government granted five hectares of land for the assembly facilities, with an option to expand to seven additional adjacent hectares. The construction of the plant was supported by Conacyt, Nafin, the Aguascalientes government and his own resources. Currently, the company manufactures and sells the Ecco-C1, Ecco-C2 and Ecco-C3 models. Mastretta In November 2007, Mastretta Design built the commercial version of the first sports car designed and produced by national technicians. The design and creation of the prototype received 2.5 million dollars in investment, of which 15% were contributed by Conacyt. Recently, the Mexican sports car Mastretta MXT was exhibited in the Paris Showroom. The car began sales in 2011 with 35 units sold in Europe, and it is estimated that by 2012 it will reach other export destinations such as the United States and the Middle East. The car sells for 55 thousand dollars. Dina Dina is a Mexican company that was founded in 1951. Currently, it manufactures and sells cargo and passenger vehicles. It has a production capacity of 23 urban units per day and a network of distributors in the cities of Monterrey, Hidalgo, State of Mexico, Mexico City, Oaxaca, Guadalajara, Len, Mrida and Veracruz. In recent years, Dina has invested more than 120 million dollars in the consolidation of its exports to the US and Central American markets. Proof of this, is the exportation to the United States of its first 200 port tractors, which are part of an order of five thousand for the next ten years, as well as the first buses to Nicaragua, from an order of 350 units. Dina uses its own technology in its buses, which was developed in collaboration with nine Mexican universities and government entities, such as the National Science and Technology Council (Conacyt) and business plans supported by Nacional Financiera (Nafin), the Bank of Foreign Trade (Bancomext) and the Mining Trust Fund (Fifomi). An example of the Mexican companys innovation capacity is the way it adapts its vehicles to the competitive environment by designing and manufacturing environmentally friendly vehicles. An example is the case of the urban project that involves designing and manufacturing a hybrid bus and tram, together with the Universidad Autnoma Metropolitana (UAM) and CONACYT.
25
26
Source: ProMexico
In addition to the ACT model, the federal government is willing to support and promote the development of small and mediumsized businesses through the National Entrepreneur Institute (INE).
27
28
. ased on calculations, the total market demand is 18.1 B billion dollars and is constituted by the addition of national supply (6.3 million) and imports (11.8 million) of pieces and components that use this manufacturing process. . his means that national supply is 6.3 billion dollars, that T is, national manufacturers supply 34.8% of demand in the automotive sector. Furthermore, the market opportunity is 11.8 billion dollars because the terminal automotive and auto parts industry is forced to import final parts based on this manufacturing process.
71% of total demand for processes is imported; therefore, there are huge investment opportunities for foreign companies. Some of the most demanded processes are stamping, casting, forging and machining.
The following graph shows the opportunity described in the first ten supply processes for the automotive industry, which account for 85% of the opportunity identified by ProMxico. Graph 16. Total Market Value And Investment Opportunity In The Supply Chain Of The Automotive Industry In Mexico (Billions Of Dollars)
Below are the 11 remaining processes that account for 15% of processes that ProMxico identified as investment opportunity.
Graph 17. Total Market Value And Investment Opportunity In The Supply Chain Of The Automotive Industry In Mexico (Billions Of Dollars)
29
7. Legal Framework
7.1 PROSEC, Regla Octava, IMMEX and Drawback for the Automotive Industry
Sectoral Promotion Programs (PROSEC) are aimed at manufacturers to help them import inputs with preferential tariff, in order to maintain their competitiveness, particularly in globalized industries like the automotive. This way, most of Automotive PROSEC inputs can be imported with tariff exemption. Table 11. Tariff Structure Of The Automotive Prosec # of tariff fractions 2007 1,837 420 53 2 # of current tariff fractions (%) 602 136 21 2 Tariff (%) 0 3 5
Participating companies
The automotive Decree establishes three registration options to get its benefits
Article 3 Article 4 Article 7
Descripcin
Light vehicle producers established in Mexico that have invested at least 100 million dollars in fixed assets and produced at least 50,000 units annually Chrysler Ford Nissa-Renault Volkswagen Honda Toyota General Motors
Companies that perform or will perform manufacturing, assembly or bulletproofing processes that will increase the value of the vehicle by 50%
Companies that are in process of complying with annual production value established in article 3, but have covered the rest of the requirements established in the same article
BMW
None
2,312
761
10
Automotive eighth rule (tariff fraction 9802.00.19)31 when companies registered in the Automotive PROSEC meet the following criteria:
Regla Octava (Eighth Rule): is a mechanism linked to sectoral promotion programs of the electric industry which enables the import of materials, inputs, parts and components through tariff sections that have zero tariff from item 98.02 of the Mexican Importation and Exportation Fees [TIGIE], by fulfilling certain requirements (Eighth Rule of the complementary rules). Manufacturing Maquila and Export Services Industry (IMMEX): simplifies procedures and requirements for the maquila regime for companies that already have a structured business plan. It enables the temporary import of goods and services for use in an industrial process that is aimed at producing, transforming or repairing goods imported from abroad. Return of Import Taxes to Exporters (DRAWBACK): offers the possibility of obtaining a return on general import tax paid for goods that were incorporated to export goods, or for goods that are returned in the same state or which have undergone repair or alteration processes.
To diversify supply sources and maintain competitiveness To satisfy the needs of new investment projects Due to a lack of production or national supply
To be considered manufacturing companies for the purposes of provisions on automotive tax deposit and other provisions of the Customs Law. To be able to import with zero ad-valorem tariff any vehicles of the segments which produce in Mexico, under the tariff/ quota, for an annual volume equal to 10% of production of the immediately previous year. To be automatically considered manufacturing companies under the Sectoral Promotion Program of the Automotive and Autoparts Industry
31. Goods for the Sectoral Promotion Program of the Automotive and Auto Parts Industry, when companies have the authorization referred to in the 8th Complementary Rule, for the interpretation and application of the Fee of the Law on General Importation and Exportation Taxes based on the criteria established by the Ministry of Economy. SIAVI. 32. Modified on April 15, 2010. 33. Ministry of Economy, Monograph of the Automotive Industry.
31
The European Union Case The WP.29 was established in June 6, 1952 as part of the Inland Transport Committee, through resolution number 45 of the Subcommittee on Road Transport (SC.1) of the United Nations Economic Commission for Europe (UNECE). Its first report specified the types of issues at the time. For example, if it was best to install one or two red lights in the rear of a vehicle, etc. Slowly, the working program was shaped and concerns regarding accident prevention began to manifest. WP.29s meetings are public; any government or interested party may attend the meetings and observe their work. The official procedure to participate is very simple: a letter is sent, signed by the authorized officer in the relevant country or in the relevant regional organization of economic integration, notifying the secretary of the WP.29 of the country or organizations desire to send representatives to the meetings and participate in the WP.29s activities. Normally, the WP.29 meets three times a year. The subsidiary expert working groups each meet twice a year. The Forum issues standards in the following areas: Active safety in vehicles and their components (accident prevention) Passive safety in vehicles and their components (collision resistance) Environmental considerations General safety considerations Special technical considerations The United States Case The World Trade Organizations Agreement on Technical Obstacles is a document that establishes the characteristics of a product or the production processes or methods related to them, including applicable administrative provisions, and whose observance is mandatory. It can also include prescriptions for terminology, symbols, packaging, marking or labeling that are applicable to a product, process or production method, or deal exclusively with them. The principles followed and defended by the WTO are: Most Favored Nation Treatment, which establishes that the Members will ensure that, with respect to technical regulations, any products imported from a Member are treated no less favorably than similar products from any other country.
National Treatment, which establishes that the Members will ensure that, with respect to technical regulations, any products imported from the territory of a Member are treated no less favorably than similar products of national origin.
Complementing the above, the standards and guidelines that a vehicle imported from the United States must follow are established by the countrys Department of Transportation, which has a list of safety regulations and standards for vehicles in general. Effects in Changes to Standards and Certifications by the United States. An example of measures that affect the car manufacturing/exportation platform in Mexico was President Barack Obamas announcement in July 2011, when he revealed the agreement between the Presidency and 13 light vehicle manufacturers (Ford, GM, Chrysler, BMW, Honda, Hyundai, Jaguar/ Land Rover, Kia, Mazda, Mitsubishi, Nissan, Toyota and Volvo), regarding fuel efficiency. The brands that signed the agreement currently account for 90% of vehicles sold in the United States. The agreement establishes that, for the 2012-2016 period, vehicles are expected to have a fuel efficiency of 15 km/l (35m/gal), while by 2025 it is expected to increase to 23 km/l (54.5 m/gal). The increased efficiency would involve a reduction of 1.7 trillion dollars on gasoline expenditure, an average of eight thousand dollars per vehicle for 2025. This is part of a consensus established by assemblers to invest in R&D of new vehicles and clean technologies; however, the impact on Mexicos automotive platform did not create big concerns because the industrys design and technology in our country have the infrastructure and talent required for the new production of vehicles, and even offer Mexico the opportunity to become a relevant producer of environmentally friendly vehicles. According to Car and Driver, new environmental standards could give Japanese auto makers such as Toyota, Honda and Nissan, and their Korean peers Hyundai and Kia, an advantage because the improvements required to comply with standards are substantially less than those facing the rest of automotive companies. Ford would have to improve by 22.4% its cars fuel performance, while General Motors would have to do so by 24.1%. Finally, although Chrysler faces the challenge of improving by 25.3% the fuel performance of its cars, Fiats penetration (which currently owns 53.5% of Chrysler) will surely facilitate reaching the standards established by the US government.
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8. Market Access
Mexico has excellent communication routes. Its wide network of roads and its railroad system connect its northern and southern borders, establishing connections between the United States, Guatemala and Belize. In addition, its eastern and western coasts connect the ports of the Pacific Ocean with the Gulf of Mexico and the Caribbean, in the Atlantic Ocean. Mexico has: The following table shows the rules of origin related to the automotive industry which result from the various free trade or economic cooperation agreements.
FTA/ Economic Cooperation NAFTA The regional value content (VCR) required must be 62.5% (for vehicles to transport 15 or less people) or 60% (for vehicles to transport 16 or more people) under the net cost method. Automotive origin rules
74 airports (11 domestic and 63 international). 116 sea ports (116 coastal and 67 deep-sea). 27 thousand kilometers of railroads. 138 thousand kilometers of paved roads (126 thousand kilo. meters of two lane roads and 13 thousand kilometers of four or more lane road
European Union
To grant the status of original, the value of all the materials used to manufacture the product must not exceed 40% of its factory price.
To grant the status of original, the value of all the materials used to manufacture the product must not exceed 40% of its factory price.
Mexico has the second largest number of Free Trade Agreements in the world. It has a network of twelve Free Trade Agreements and an Economic Partnership Agreement, maintaining preferential access to the markets of 44 countries that include the worlds leading economies, such as the United States, Canada, the 27 members of the European Union and Japan.34 This means that Mexico has preferential access to more than one billion potential consumers and accounts for 64.9% of the global GDP.35 Currently, Mexico has the exporting strategies of large assembly companies that rely on the advantages offered by Mexicos Free Trade Agreements with various countries, especially NAFTA, that make the country an excellent platform to the United States and other countries, strengthening the industrys position at highly competitive levels. In addition, Mexico has reduced the average tariff from 13% to 8%, and it is estimated that it will reach 4% for the whole world by 2012. This will increase the profitability of companies established in Mexico, providing them access to inputs and final products at competitive prices. A free trade agreement benefits the countries that comprise a trade zone. To determine which goods from countries that are not part of a trade zone might enjoy preferential tariff treatment, rules of origin are used.
Mercosur Colombia* Chile Bolivia Costa Rica and Nicaragua Guatemala, Salvador Israel Peru** Japan
Brazil and Argentina: Regional Content Index (ICR) that must not be below 60%; Uruguay: ICR not below 50%; Mxico ICR not below 30% VCN of 35% to 50% VCR of at least 32% using the transaction value method, or VCR of at least 26% using the net cost method VCR of at least 32% using the net cost method VCR of at least 32% using the net cost method
Honduras and El
VCR of at least 50% 40% using the transaction value, or 30% using the net cost method. VCR of at least 35% VCR of at least 65%
* In April 2011 Mexico and Colombia reached an agreement to modify the rules of origin applicable to certain vehicles. ** In April 2011 Mexico and Peru signed a free trade agreement, which is under approval.
34
35
Work to research new services that can provide support to regional actions to improve innovation conditions Boost international cooperation, or even strategic alliances, to find solutions to various issues. Create awareness on the importance of innovation in the automotive industry in the various decision-making levels.
To create the network of innovation, meetings were held between design centers until the network of centers was established to work in joint projects. This leads us to think about the possibility of comparing, and perhaps replicating, some of the best practices in Mexico. However, our country has a similar network in AERIS, which could be strengthened to create an intelligence network to attract new component or vehicle projects, creating a shift not only in production, but also generating higher added value through design in Mexico.
36
X Conclusions
37
10. Conclusions
Mexicos automotive industry is experiencing momentum. Internationally, Mexico is now a solid vehicle producer and exporter; however, competitiveness in the automotive sector forces us to concentrate in our future to continue to be among industry leaders. While it is true that Mexicos automotive industry is mature and interconnected to the auto parts industry, there is a lot of room for improvements that could boost growth in the industry. Some of these factors are identified in the document Dialogue of the Automotive Industry 2012-2018, created by AMIA, INA, ANPACT and AMDA. ProMxico has played an active role in measuring and proposing indicators to support the four pillars shown in the document, which is aimed at leveraging Mexicos automotive industry in the short, medium and long term. It is worth noting that the joint effort of the relevant players in planning and resolution presented in the document will boost Mexico not only as a production and export platform, but as an attractive domestic market and a country that designs and develops products as well. Finally, Mexico is an important ally in the international business strategies of assembly companies. A clear example is the level of foreign direct investment recorded in the sector. In recent years, several companies - Nissan, Mazda, Audi, Chrysler, Ford and Volkswagen- have made important investments in the country. ProMxico provides support in three areas: 1) identification of new investment opportunities, 2) support to export Mexican products, and 3) company internationalization. These actions include supplying processes that will turn Mexico into an international reference of the industry.
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40