Mexico Automotive Summit 2019 Impact Report by Mexico Business Publishing

IMPACT REPORT

2019

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2019 The automotive industry remains a strong pillar of Mexico’s economy, despite facing strong headwinds. Vehicle production and exports are still on the rise as companies ramp up or launch their manufacturing operations. The cloud of uncertainty that loomed over the industry has also somewhat dissipated after the signing of USMCA, although concerns remain due to its pending ratification in Canada and the US.

Regardless, investment continues to flow into the country, mostly from suppliers arriving to support the latest OEM entrants. Following ProMéxico’s closure, state governments and private players have picked up the slack to make sure the country remains an attractive investment destination. As the country reaches its full vehicle manufacturing potential, auto parts manufacturers are gaining confidence in stronger results for the coming years.

Although the industry is fighting an ongoing sales downturn, experts are confident the domestic market will regain its strength, although it will take some time before this happens. Still, manufacturers are preparing by establishing new marketing schemes and adopting technology developments that tap into the ever-growing digitalization and shared mobility trends.

Bringing together key decision-makers from the public and private sectors, Mexico Automotive Summit is the industry’s main event of the year, where leading figures gather to discuss the trends, challenges and opportunities that are opening up. Now in its sixth edition, Mexico Automotive Summit provides the ultimate platform for developing new business relationships in this dynamic industry.

2019

Quick Look:

“Mexico is the largest truck exporter in the world. Twenty years ago, Mexico exported 1,000 heavy vehicles per year; now we export 161,000” Miguel Elizalde, Executive President of ANPACT

INCLUDING: ∙∙ Carlos Bárcena, Ministry of Zacatecas ∙∙ Fausto Cuevas, AMIA ∙∙ Óscar Albin, INA ∙∙ Miguel Elizalde, ANPACT

TOP SPEAKERS

∙∙ Guillermo Prieto, AMDA ∙∙ Enrique Enrich, Scania Mexico ∙∙ Flavio Rivera, Daimler Vehículos Comerciales México ∙∙ Fernando Enciso, Grupo Surman ∙∙ Manuel Montoya, CLAUT ∙∙ Alfredo Arzola, CLAUGTO

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105 COMPANIES REPRESENTED

“The automotive sector is without a doubt one of the main drivers of Mexico’s economy” Guillermo Rosales, Director General of AMDA

203

PARTICIPANTS

“The industry is in the midst of a race and thus, clusters must act as the coordinating body to foster the development of new technology plans and human capital, as well as to monitor closely the changes that are already upon us” Tarsicio Carreón, President of the Chihuahua Automotive Cluster

COMPA N Y AT T E N DA N C E 3C Metrology

El Financiero

Lavartex

ABB

ERM

MAN Truck & Bus Mexico

ACERO PRIME

Evolución en Moldes

MAS Seguros

Advanced Business Events

Evonik

Mercado Libre

Agora

Fanuc

Mikel's

ALD Automotive

Flanders

Morpheus.Network

ALPHA HARDIN

Flex-N-Gate

Murguia

AMDA

Giant Motors

Nicro Bolta

AMIA

GiPA

NISSHA PMX

ANCE

GNP

NSK

Automotive News México

Gobierno de Zacatecas

Omron

Axon' Interconex

Grupo CTT

Polymathyx

BASF

Grupo Industrial Saltillo

Polyworks

BBVA

Grupo Surman

Portal Político

Bconnect

Guantes Vargas

Quálitas

Belden

Guhring

Randstad

Big Kaiser

GYMPASS

Reino de los Países Bajos

Boccar

HANNOVER FAIRS MEXICO

Riken

BROSE

HAYS México

Rockwell

BTSD

Hellman

SCANIA

CASA SAN ANTONIO

Hogan Lovells

Seko Logistics

Catch Consulting

Hub Group

Sesma, Sesma & McNeese

Ceratizit Group

IBERDROLA

Softtek

CHG Meridian

IMG

SSA MEXICO

CIDESI

INA

Tarsus Mexico

CLAUGTO

Insur

Ternium

Claugto Cluster Automotriz Guanajuato

Integra Automation

TI Fluid Systems

COFOCE

Intercovamex

TIBA

Cuprum

Ixaya

Timken

Daimler Trucks México

JATO Dynamics

Top Group

Dassault Systèmes de México

KFW-IPEX Bank

Traffilog

dbschenker

Korn Ferry International

Uber

Deloitte

Kronos

UBSA

DENSO

Kuraray Mexico

Von Wobeser y Sierra

DUPONT

LatamAutos

Waze Mexico

Press Speakers

Profile of Attendees

C-Level 50.6% Upper Management

35% C-Level Upper Management 12.7% Speakers 1.7% Press

Press 3 Attendees 154 (91 High Speakers 23

P R O GR A M

07:30 REGISTRATION 08:30

MANUFACTURING MUSCLE FUELED BY NATIONAL GROWTH

Presentation: Carlos Bárcena Pous, Minister of Economy of Zacatecas 09:15

LOCAL STRATEGIES FOR IMPROVED REGIONAL SUPPLY

Moderator:

Óscar Albin, Executive President of INA

Panelists:

Juan José Zaragoza, Mexico Sales and Country Leader of DuPont Transportation & Industrial

Miguel Elizalde, Executive President of ANPACT

Flavio Rivera, President and Director General of Daimler Vehículos Comerciales México

Juan Pizano, Global Trade Advisory Services Partner and Leading Partner for the Automotive Industry at Deloitte México

10:15

NETWORKING COFFEE BREAK

10:45

COLLABORATIVE STRENGTH FOR INDUSTRIAL GROWTH

Moderator:

Alejandro Salas, Senior Editorial Manager at Mexico Business Publishing

Panelists:

Manuel Montoya, Director of CLAUT

Alejandro Veraza, President of the Automotive Cluster of San Luis Potosi

Tarsicio Carreón, President of the Chihuahua Automotive Cluster

Elisa Crespo, Executive President and Adviser of the Automotive Cluster of the State of Mexico

Alfredo Arzola, Director General of CLAUGTO

12:15

NETWORKING COFFEE BREAK

12:45

MOBILITY AND SALES IN THE DIGITAL ERA

Moderator:

Guillermo Prieto, Chairman of AMDA

Panelists:

Anasofía Sánchez, Director General of Waze in México

Rodrigo Hütt, Head of Classifieds at Mercado Libre

Fernando Enciso, Director Mexico of Grupo Surman

Luis Vega, Business Development Director for Consumer Financing at BBVA

13:30

NETWORKING LUNCH

15:00

MEXICO’S POSITION WITHIN OEM DEVELOPMENT STRATEGIES

Moderator:

Guillermo Rosales, Director General of AMDA

Panelists:

Enrique Enrich, Managing Director of Scania Mexico

Gerardo San Román, Head of Latin America at JATO Dynamics

Elías Massri, General Director and Chairman of the Administration Board at Giant Motors Latinoamérica

Mario Olea, Director of Bentley Motors Mexico

Fausto Cuevas, Director General of AMIA

16:30

ON THE VERGE OF USMCA, HOW IS MEXICO'S INDUSTRY DOING?

Presentation: Fausto Cuevas, Director General of AMIA 17:00

NETWORKING COCKTAIL

HIG HL I G HTS 201 9

KEY SPEAKER

MANUFACTURING MUSCLE FUELED BY NATIONAL GROWTH Carlos Bárcena Pous, Minister of Economy for the state of Zacatecas, made the case for the state as a unique destination for automotive investment during his opening presentation at Mexico Automotive Summit 2019 on Wednesday at Mexico City’s Sheraton Maria Isabel Hotel. Despite the lack of major automakers, the state connects the central region to the north, and has a unique footprint from the mining and information technology sectors that are ideal partners for the car industry, Bárcena said. “Connectivity and innovation make this the ideal place to invest in.”

CARLOS BÁRCENA POUS

Bárcena launched his case with the premier tenet of the real estate market: location.

Minister of Economy of Zacatecas

Using a map of Mexico, he highlighted the location of major automakers in an axis

Carlos Bárcena Pous has a Bachelor’s

around the state: Guanajuato, San Luis Potosi, Queretaro and Aguascalientes to

from the Monterrey Institute of

the south and east, and Cohuila and Nuevo Leon to the north. The state also has a

Technology in chemical engineering.

natural corridor that is traversed by highway 45, he said, connecting the south to

He has 30 years of experience working

the north. In the middle of this corridor is the regional airport serviced with direct

in the chemical, hospital management

international flights to cities such as Chicago and Los Angeles. Through the state

and operation, manufacturing and

run some of the country’s largest gas pipelines, which can service major industrial

public administration sectors. Bárcena

operations. Lastly, Bárcena highlighted the availability of alternative energy sources.

has worked for almost nine years in

“Because of long sun hours and windy conditions, the state has seen significant

high-ranking government positions.

developments in renewable energy parks by major companies such as Iberdrola and

In September 2016, he was appointed

Blackrock Investment,” he said.

Minister of Economy of the State of Zacatecas, after serving as Minister of

Along the state border with San Luis Potosi, Zacatecas’ industrial region hosts

Economic Development for the State

numerous companies that already work with automotive partners or have potential

of San Luis Potosi between March

to enter the sector, Bárcena said, adding that businesses in the mining, food and

2007 and September 2009.

agro-industrial sectors were natural partners for the automotive sector. “The mining industry has strong international supply chain logistics, and more importantly, within its supply chain, there are many companies that forge and manufacture metal products,” he pointed out. The food and agro industries, in turn, are “major producers of plastics and chemical products, many of which could be applied to automotive manufacturing.” These industrial operations are fed by a large workforce, which has the average age of 26 years. “Apart from manufacturing experience, the state has a range of universities and industrial parks where innovative minds are working on engineering and information technology solutions not only for automotive, but also for the aerospace and IT sectors,” Barcéna said.

H I GH L I GH TS 2 019 Given these circumstances, the state’s administration has an ambitious strategy to increase the presence of the automotive sector. It aims to generate 40,000 jobs in five years, with a large portion of these in the automotive industry, Bárcena said. “The state has a strategic budget that has been set up to facilitate the needs of local businesses.” He added that the government is prepared to provide incentives in different forms. Among those is a two-year income tax exemption for new arrivals. The government also is reaching out to foreign companies and governments through bodies such as the Council of Zacatecas for Innovation. This has led to projects including a new industrial park to be built in partnership with the Chinese government, and a special “knowledge city” that the state has dubbed “Quantum.” It is here, Bárcena said, that the new innovations of Industry 4.0

“Apart from manufacturing experience, the state has a range of universities and industrial parks where innovative minds are working on engineering and information technology solutions not only for automotive, but also for the aerospace and IT sectors” Carlos Bárcena Pous, Minister of Economy of Zacatecas

will come to fruition.

MEXICAN MANUFACTURING CARRIES HEAVY WEIGHT IN THE INTERNATIONAL MARKET While Mexico has made significant leaps in the manufacture of light vehicles, it has not fallen behind on heavy vehicles, even if the latter spends less time in the spotlight. “Often, Mexico’s strong light-vehicle market does not allow us to see the significant growth of the heavy-vehicle manufacturing sector,” said Óscar Albin, Executive President of INA, at Mexico Automotive Summit, held on Wednesday at the Hotel Sheraton Maria Isabel in Mexico City. Mexico’s heavy-vehicle industry has a lot to be proud of, added Miguel Elizalde, Executive President of ANPACT. “Mexico is the largest truck exporter in the world,” he said. “Twenty years ago, Mexico exported 1,000 heavy vehicles per year; now we export 161,000.” The country owes this growth, to its large number of FTAs and excellent manufacturing practices, explained Elizalde. “Mexican plants stand out thanks to their efficiency and certifications. We also keep up with the latest international standards.” The country’s efforts are expected to continue bearing fruit. “Mexico is evolving from a high-quality manufacturing country to a country of

HIG HL I G HTS 201 9 KEY SPEAKER

transformation,” agreed Juan José Zaragoza, Mexico Business and Country Leader of DuPont Transportation & Industrial. Mexico is also in a strategic position to export to North and Latin America. However, “location is not enough. It must be supported by policies that support the manufacturing sector and a strong labor force. Education is essential for the manufacturing sector,” said Flavio Rivera, Director General of Daimler Trucks. While most exports are headed to the US and Canada, the country is now beginning to take advantage of its numerous FTAs and export to other countries in Latin America, such as Colombia.

ÓSCAR ALBIN Executive President of INA

Although Mexico has FTAs with 45 countries, most exports still head to a single

Óscar Albin completed his studies

destination. “Mexico has an enviable number of FTAs, but our exports depend mainly

in mechanical engineering at the

on only one country, the US,” said Juan Pizano, Global Trade Advisory Services

Monterrey Institute of Technology,

Partner at Deloitte Consulting Group, while acknowledging that Mexico’s strong links

as well as a Master’s in renewable

with the US and also Canada were positive for the country’s manufacturing sector.

energies. He began his career at

“The close integration Mexico has with its commercial partners has allowed for the

Volkswagen de México in 1982, later

development of a very complex supply chain,” he said.

moving to Chrysler where he served as Development Manager of Mexican

However, it also brought about a significant challenge as trade tensions between

Suppliers in Detroit for four years.

Mexico and its northern neighbor may cause problems for the local automotive

After the company’s merger with

industry. Pizano explained that he is not too concerned about Mexico’s capabilities

Daimler, he became Procurement

to adhere to the USMCA’s rules of origin thanks to the strong linkage between the

Director of Mercedes-Benz Spain.

supply chains of Mexico, the US and Canada. However, he said that the sector must

In 2012, Albin assumed the role of

consider a rule that states that 70 percent of steel has to be bought locally. “We do

Executive President of INA.

not know if those amounts of steel will be available in Mexico,” said Pizano. Moreover, while many anxiously wait for the ratification of USMCA, compliance with the 70 percent steel rule starts a year previous to the ratification of the treaty. While Mexico’s heavy-vehicle industry has greatly grown its exports, there are significant challenges in the local market. “It is necessary to strengthen Mexico’s heavy-vehicle market,” said Elizalde. While exports have skyrocketed, this is not the case for local sales. “ANPACT members sell about 40,000 trucks per year. This number has remained the same since 2000,” he added. The reason is that local regulations for heavy vehicles are not as strict as those in foreign markets. As a result, Mexico imports old, used vehicles from the US. “Mexican manufacturers follow strict regulations to allow for our products to be exported but local regulations do not enforce these strict requirements, so many users import substandard vehicles. For every 4,000 vehicles ANPACT members sell per year, 10,000 more vehicles are imported from the US,” said Elizalde. For that reason, the industry is calling for stronger internal regulations that promote the replacement of older, imported vehicles with newer fleets.

COLLABORATIVE STRENGTH FOR INDUSTRIAL GROWTH The automotive industry is rapidly changing and clusters need to take a coordinating role between industry participants to foster the development of new technologies and human capital, panelists said at Mexico Automotive Summit 2019, as they reflected on the role that industry clusters must play to brave the changes that are coming. “The industry is in the midst of a race, and thus, clusters must act as the coordinating body to foster the development of new technology plans, human capital and monitor closely the changes that are already upon us,” said Tarsicio Carreón, President of the

H I GH L I GH TS 2 019

Chihuahua Automotive Cluster, during a summit discussion at the Hotel Sheraton

KEY SPEAKER

María Isabel in Mexico City on Wednesday. Carreón was joined by Manuel Montoya, Director of CLAUT; Alejandro Veraza, President of the Automotive Cluster of San Luis Potosi; Elisa Crespo Ferrer, Executive President and Adviser of the Automotive Cluster of the State of Mexico; Alfredo Arzola, Director General of CLAUGTO; and moderator Alejandro Salas, Senior Editorial Manager at Mexico Business Publishing, to discuss the challenges the clusters and the industry face as a whole, and how they are working collaboratively to boost the performance of the Mexican automotive industry.

ALFREDO ARZOLA According to Montoya, the industry has the challenge of working in two different

Director General of CLAUGTO

lanes: focusing on the challenges of today and focusing on the changes that are

Alfredo Arzola worked for six years

coming. “Today the industry must focus on solving the talent shortages it faces,

on international promotion and

while as a future concern, it has to focus on integrating more engineering to provide

global sales with a specialization in

higher added value to the Mexican industry.”

Central American, Caribbean and North American markets. For two

For panelists, talent shortage continues to be a significant constraint, not for the

years, he was dedicated to investment

lack of engineers, but for the lack of those with the needed specialized industry

promotion strategies for Guanajuato

knowledge. Crespo said that in that regard, the industry has a responsibility to share

with a focus on Asia and Europe

knowledge and technology with universities. “The industry has the responsibility

and he spent five years developing

of transferring knowledge to academia. Not just giving classes, but investing in

Guanajuato’s supply chain and its

technology for universities.”

industrial politics. He has a Bachelor’s in foreign trade and customs and

The talent shortage does not only reflect university graduates but also high-school

a post-graduate degree in high-

and middle-school graduates, added Veraza. “The technical level is very important.

management from the Iberian-

Most plant operators only reached a high-school or middle-school level, hence

American University in Leon.

the technical knowledge is critical for them.” For that matter, Veraza said that the San Luis Potosi cluster is already moving to create working committees between academia and the private sector to share better practices. For Arzola, in addition to the challenge stemming from the talent shortage, clusters need to focus on the generation of a strategic vision for the automotive industry. “The market is experiencing significant changes, and there is volatility and uncertainty

HIG HL I G HTS 201 9 in different contexts. As an industry, we need certainty about where we are going. We need to generate a strategic vision of where we want to be three years from now,” he said. The need of a strategic vision in light of the changes to come is an important matter of attention for clusters, said Montoya. “Around 80 percent of the companies of the cluster work in the production of components for internal combustion systems. These companies need to transform.” To which Carreón added: “Companies need to adapt to the evolving needs of clients.”

CHANGING CUSTOMER PROFILE SPURS DIGITAL PUSH If you can’t beat them, join them. That seems to be the motto pushing companies in the automotive industry into the digital era that is changing the way customers choose to buy a vehicle or not, according to panelists at the Mexico Automotive Summit at the Mexico City Hotel Sheraton Maria Isabel on Wednesday. Mexico City is the fifth-largest city in the world with 8.8 million people making 35 million trips daily, whether in private vehicles or public transport. Against this backdrop, banks, industry associations and even digital platforms are rethinking the way they sell to customers driven by the purchase experience and a quick response.

“The acquisition process involves an emotional component. As a community, we enjoy socializing and vehicles are part of our personality. We are trying to understand, process and cultivate our people in this new system” Rodrigo Hütt, Head of Classifieds at Mercado Libre

One of the platforms embracing the trend is Waze, which recently launched a new app called Waze Carpool, a tool with the goal of making rides more organized by searching for people going in the same direction as the user who requests the trip. The company expects a 40 percent reduction in travel times during peak hours, said Director General of Waze in Mexico Anasofía Sánchez during the panel discussion Mobility and Sales in the Digital Era. She quickly pointed out, however, that such efforts alone will not make the difference. “We have seen that this is not enough. The change has to come from all the

H I GH L I GH TS 2 019 people in the city. Waze’s ambition is to end traffic congestion altogether, as a

KEY SPEAKER

community,” said Sánchez. A platform that has seen first-hand the change in customer preferences is Mercado Libre, which is a growing platform for people hunting for both pre-owned and new vehicles. In this process, the Head of Classifieds at the company, Rodrigo Hütt, said the company has identified three stages: research, consideration, and closure. And the transition is clear. Mercado Libre has found that nine out of 10 people begin their vehicle search on the internet, with 80 percent of them doing it from a smartphone. This environment has also forced vehicle distributors to change to remain relevant.

GUILLERMO PRIETO

Director Mexico of Grupo Surman Fernando Enciso believes the answer is in

Chairman of AMDA

customer experience. “With a new customer profile, we must innovate, get into

Guillermo Prieto is Chairman of AMDA

new technologies, even use platforms such as Mercado Libre,” he said.

and of the Latin American Vehicle Dealership Association (ALADDA).

Enciso pointed out that the reasons people buy a vehicle today are clearly evident,

Prieto was Adviser at the General

whether it is for luxury, comfort, status or necessity. “The acquisition process involves

Direction of Income Policies of the

an emotional component. As a community, we enjoy socializing and vehicles are part

Ministry of Finance and Public Credit

of our personality. We are trying to understand, process and cultivate our people in

and occupied several positions at

this new system,” he said.

the National Banking and Securities Commission. From 2001 to 2009,

But for most of people, buying a vehicle would not be possible without financing.

he was Executive President and

Business Development Director of Consumer Financing at BBVA Luis Vega said that

Director General of the Mexican

the Spanish bank is already working with online startup Kavak to accompany the

Stock Exchange (BMV). He has a

client in the vehicle purchasing process until the vehicle is delivered. “Customers

degree in economics from ITAM and a

place more value on how fast they can get their car than the price. At the moment,

Master’s in public administration from

when a client requests a loan through BBVA’s website, they get an answer in less

Harvard’s John F. Kennedy School of

than 18 minutes. And it is a final response,” said Vega.

Government.

SLOWER SALES DON’T DIMINISH MEXICO’S ATTRACTIVENESS FOR AUTOMAKERS Beyond its strengths as a car manufacturer and exporter, Mexico has a dynamic market that has attracted numerous brands both for the light- and heavy-vehicle markets. “The automotive sector is without a doubt one of the main motors of Mexico’s economy,” said Guillermo Rosales, Director General of AMDA, at the sixth edition of Mexico Automotive Summit, held on Wednesday. Panelists met at Sheraton Maria Isabel in Mexico City to discuss the reasons behind this growth and the opportunities for brands in the local market. “Mexico is a solid market that has attracted many brands,” said Gerardo San Román, Head of Latin America at JATO Dynamics. There are 42 different brands serving the light-vehicle market, which speaks to the country’s attractiveness. “Having all possible brands in Mexico speaks of a welcoming market, no matter the number of sales. The Mexican market is still attractive to all OEMs in the world,” said Mario Olea, former Director of

first nine months of 2019, Mexico sold 7.5 percent fewer

“Having all possible brands in Mexico speaks of a welcoming market, no matter the number of sales. The Mexican market is still attractive to all OEMs in the world”

vehicles than during the same period in 2018.

Gerardo San Román, Head of Latin America at JATO Dynamics

Bentley México. However, sales of light vehicles have been sluggish for the past few years. “This will be the third year in a row with lower light-vehicle sales. We have been unable to reach the numbers of 2017,” said Rosales. During the

HIG HL I G HTS 201 9

Although 2019 is seeing sales of all types of cars falling, there are still opportunities for the Mexican market, explained Rosales. However, there are significant challenges to address to achieve a recovery. Chief among them are loans to buy new cars. “Many major credit agencies are not taking risks and only giving loans to those who they are fully certain will repay them. The reason for this is the problems inherent in recovering a car after the buyer stops paying. Changing regulations to facilitate the recovery of the car will allow lessors to take on more risk,” said Fausto Cuevas,

KEY SPEAKER

Director General of AMIA. Illegally imported cars are another area of concern. Importing old, used cars, mainly from the US, has been a common problem for Mexico, explained Cuevas. “Importation of used cars also affects the sale of used vehicles in Mexico as it greatly lowers prices. It also discourages local car owners to sell their cars since they will get only a fraction of what it is worth. Addressing these two matters will allow us to strengthen sales of light vehicles.” For heavy vehicles, the market has become increasingly open thanks to regulatory

GUILLERMO ROSALES

changes. “Mexico recently opened its market to European trucks thanks to regulatory

Director General of AMDA

changes. Several years ago, Mexico’s regulations were identical to those of the US

Guillermo Rosales has worked in

but European norms are gaining strength in many countries in Latin America,” said

the rural and fishing sectors, in

Enrique Enrich, Managing Director of Scania Mexico. Opening the market to a larger

development banks and in Veracruz’s

number of players benefits customers first and foremost because it gives them more

public sector. He joined AMDA in

choices. An area that offers significant opportunities is delivery services, particularly

2004, where he is now Director

for “the last mile,” which require a larger number of smaller vehicles, explained Elías

General. He is responsible for the

Massri, General Director and Chairman of the Administration Board at Giant Motors

association’s sector studies, media

Latinoamérica. “Instead of having a single 10-ton gas truck, it is more efficient to

communication and managing

perform the last mile of delivery using several 3-ton trucks,” he said.

AMDA’s agenda with Congress and with the federal government. Rosales

The increased acquisition of used cars must also be addressed in order to refurbish

has a Bachelor’s in fishing engineering

local fleets of all types of vehicles. Rosales stated that INEGI’s latest report indicated

from the Technological Institute of

that 34 million vehicles circulate in Mexico, including cars, bicycles and buses. The

the Sea and a post-graduate degree

average age of these vehicles is 17 years. “Due to their age and their emissions, these

in finance from the University of

cars should be removed from circulation, which would allow for the growth of the

Veracruz.

light-vehicle market,” said Rosales.

H I GH L I GH TS 2 019 ON THE VERGE OF USMCA, HOW IS MEXICO'S INDUSTRY DOING?

KEY SPEAKER

The panorama of the automotive sector looks positive despite the change and uncertainty sweeping across the industry, according to Fausto Cuevas, Director General of AMIA, who believes the tools already exist in Mexico to make the industry thrive again. Fausto Cuevas, Director General of AMIA, told the audience at Mexico Automotive Summit 2019 that the country's automotive industry has several opportunities but also faces challenges in the coming years to continue being competitive worldwide. “The automotive industry has positioned itself as one of Mexico's main industries,

FAUSTO CUEVAS

contributing to job creation, currency generation and trade balance. A continuing

Director General of AMIA

drive for achievement is essential for both the industry and Mexico,” he said at the

Fausto Cuevas has been Director

Sheraton Maria Isabel Hotel in Mexico City on Wednesday.

General of AMIA since 1993. He has participated as the automotive

In his closing presentation, Cuevas highlighted the industry’s substantial contribution

industry representative in trade

to the Mexican economy. “About 3.7 percent of the country's GDP comes from the

negotiations that culminated

automotive industry, with an annual generation of US$83 billion and exports of spare

in agreements like NAFTA and

components and complete cars to over 100 nations,” he said.

MERCOSUR. He also participated in the CPTPP negotiations, the

But the industry’s impact extends beyond its own boundaries. “Job generation and

modernization of the new agreement

economic spillover transcend the sector's immediate advantages and shows that

between Mexico and the EU and the

the arrival of new companies contributes to the surrounding communities,” Cuevas

renegotiation of NAFTA, now USMCA.

said. “For example, the arrival of BMW and the expansion of Toyota in Guanajuato

He has a Bachelor’s in economics from

generated indirect jobs at restaurants and other service segments.”

UNAM and a Master’s in economic

AMIA had projected an increase in the number of units manufactured by 2020

Social Studies Institute in The Hague.

development and planning from the but a number of factors were altering expectations. “There are opportunities for development,” Cuevas said, “but the USMCA agreement and political changes in Mexico have added change and uncertainty to the expectations of the industry and its players.” According to Cuevas, the USMCA change in the laws of origin for vehicles was among the treaty’s greatest modifications. “The renegotiation increased the regional origin content from 62 to 75 percent. It is now essential to confirm that 75 percent of the components and 70 percent of steel and aluminum come from the area, as well as guaranteeing the employment of regional talent for the sector,” he explained. Greater competition from countries in North America, Europe and Asia also must be factored into the equation. “South Korea is among the countries that competes directly with Mexico and generates pressure on the Mexican industry to keep international players and investors interested in the country,” he says. However, Cuevas believes that despite the pressures and uncertainty, there are forces generating opportunities for

emerging opportunities, Cuevas said that R&D centers will

“South Korea is among the countries that competes directly with Mexico and generates pressure on the Mexican industry to keep international players and investors interested in the country”

be key for the near term. “There are more than 300 R&D

Fausto Cuevas, Director General of AMIA

the sector. “There is a strong transition from internal to electric combustion vehicles worldwide and Mexico is adding to this wave of change,” he said. “A clear example is the renovation of the Ford plant in Cuautitlan to produce electric cars.” In addition to the tools that the sector has to capitalize on

HIG HL I G HTS 201 9 centers between the industry, academia and government that are driving the sector. We have all the necessary tools and conditions to grow the industry. It's just a matter of navigating through the obstacles,” he said. “Progress will come in a matter of time because the opportunities, conditions and knowledge already exist. In spite of the barriers, I believe the automotive sector will continue to develop positively in Mexico.”

“About 3.7 percent of the country's GDP comes from the automotive industry, with an annual generation of US$83 billion and exports of spare components and complete cars to over 100 nations”

The panorama of the automotive sector looks positive

Fausto Cuevas, Director General of AMIA

challenges in the coming years to continue being competitive

despite the change and uncertainty sweeping across the industry, according to Fausto Cuevas, Director General of AMIA, who believes the tools already exist in Mexico to make the industry thrive again. Fausto Cuevas, Director General of AMIA, told the audience at Mexico Automotive Summit 2019 that the country's automotive industry has several opportunities but also faces worldwide. “The automotive industry has positioned itself as

one of Mexico's main industries, contributing to job creation, currency generation and trade balance. A continuing drive for achievement is essential for both the industry and Mexico,” he said at the Sheraton Maria Isabel Hotel in Mexico City on Wednesday. In his closing presentation, Cuevas highlighted the industry’s substantial contribution to the Mexican economy. “About 3.7 percent of the country's GDP comes from the automotive industry, with an annual generation of US$83 billion and exports of spare components and complete cars to over 100 nations,” he said. But the industry’s impact extends beyond its own boundaries. “Job generation and economic spillover transcend the sector's immediate advantages and shows that the arrival of new companies contributes to the surrounding communities,” Cuevas said. “For example, the arrival of BMW and the expansion of Toyota in Guanajuato generated indirect jobs at restaurants and other service segments.”

H I GH L I GH TS 2 019 AMIA had projected an increase in the number of units manufactured by 2020 but a number of factors were altering expectations. “There are opportunities for development,” Cuevas said, “but the USMCA agreement and political changes in Mexico have added change and uncertainty to the expectations of the industry and its players.” According to Cuevas, the USMCA change in the laws of origin for vehicles was among the treaty’s greatest modifications. “The renegotiation increased the regional origin content from 62 to 75 percent. It is now essential to confirm that 75 percent of the components and 70 percent of steel and aluminum come from the area, as well as guaranteeing the employment of regional talent for the sector,” he explained. Greater competition from countries in North America, Europe and Asia also must be factored into the equation. “South Korea is among the countries that competes directly with Mexico and generates pressure on the Mexican industry to keep international players and investors interested in the country,” he says. However, Cuevas believes that despite the pressures and uncertainty, there are forces generating opportunities for the sector. “There is a strong transition from internal to electric combustion vehicles worldwide and Mexico is adding to this wave of change,” he said. “A clear example is the renovation of the Ford plant in Cuautitlan to produce electric cars." In addition to the tools that the sector has to capitalize on emerging opportunities, Cuevas said that R&D centers will be key for the near term. “There are more than 300 R&D centers between the industry, academia and government that are driving the sector. We have all the necessary tools and conditions to grow the industry. It's just a matter of navigating through the obstacles,” he said. “Progress will come in a matter of time because the opportunities, conditions and knowledge already exist. In spite of the barriers, I believe the automotive sector will continue to develop positively in Mexico.”

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