COVID-19 A TURNING POINT FOR THE INDUSTRY: AMIA

FAUSTO CUEVAS

Director General of AMIA

Q: How has AMIA tried to convince the government to label the automotive industry as essential during the COVID-19 crisis?

A: We have remained in close communication with different

players in the executive and legislative branches, including the Ministry of Economy, the Ministry of Foreign Relations, IMSS, deputies and senators. The automotive industry generates 3.8 percent of Mexico’s GDP, 20.5 percent of the manufacturing GDP and approximately 980,000 direct jobs. Given its relevance, we approached different players and finally received the approval for the automotive industry to be labeled as essential. Coming tasks are focused on resuming operations.

As the industry gets ready to resume operations, we offer an optimistic perspective to return to the new normal. We have talked with IMSS about the health and safety protocols that must be followed. The most important element in resuming operations is to ensure the health and safety of company collaborators. It is necessary to set all necessary measures to prevent contagions at the plant. Going back to work should not mean an increase in cases.

Q: What production levels should the industry expect in the short term?

A: Production and exports have remained close to zero given that most OEMs and plants remained closed in April. This situation is unprecedented. We have never experienced that in the history of the industry. However, we need to remember that the situation is global. Other countries around the world have gone down this path at different paces. As for Mexico, we have a two-to-three-week time difference compared to the US and Europe in terms of COVID-19 cases. In Asia, as of early May, people had already returned to work. The global pandemic will have significant negative effects. It will be really difficult for the industry to recover lost production

The Mexican Association for the Automotive Industry

(AMIA) is a civil association formed in 1951 with the goal and sales levels. The goal now is to get back on track and look forward to regaining pre-pandemic levels.

Q: What other impact will the COVID-19 pandemic have on the Mexican automotive industry? A: Mexico is highly dependent on foreign trade. Around 88 percent of what is produced in Mexico goes abroad, mainly to the US, Canada, Europe and Latin America. Regarding the internal market, 64 percent of what is sold in Mexico is imported. We depend greatly on international trade, so much so, that the reignition of the industry should be aligned with the recovery in other affected markets. It is not sound to produce vehicles that do not have an end customer. Demand will grow gradually.

On the other hand, we should get used to a new normal. Specifically, all health and safety protocols that are going to be applied when resuming operations most likely will prevail for a certain period of time to provide certainty that the pandemic has indeed ended and there are no risks of new contagions. This new normal will change the way we produce and sell. We have yet to see how this new socialdistanced world will affect economic activities, including automotive. The automotive industry will get back on track under a different reality than what we were used to.

Q: How feasible is it to delay the enforcement of USMCA’s new rules of origin? A: The alternative transition regime is a figure that is only applicable to automotive rules of origin. It is not an instrument that could be applied to other sectors. This was just published on April 30 as these kinds of regimes are a feasible option that each company in each country should decide on. This offers the possibility for companies to extend the time frame under which new rules of origin should be met. The treaty as it is today established that new rules of origin should be met within a three-year period. However, under alternative transition regimes, this could be extended to five years or longer depending on the plans that each company has regarding compliance. Having said that, this regime could only apply to light and heavy OEMs, not to the entire automotive supply chain.

COVID-19 A TURNING POINT FOR THE INDUSTRY: AMIA

FAUSTO CUEVAS

Director General of AMIA