Mexico set to become top exporter of cars to the US

Monday, 03 February 2014 00:10
BY BRENDAN CASE
Bloomberg News


MEXICO CITY – Thank NAFTA.

Japan has ranked among the top two auto exporters to the United States since the 1970s, shipping Toyotas, Hondas and Nissans more than 5,000 miles across the Pacific.

The Asian nation is poised to be eclipsed this year by Mexico, which as recently as 1990 sent fewer than a quarter of a million vehicles across its northern border. Mexico’s tally will reach 1.9 million in 2015, topping Canada as the biggest exporter of cars to the world’s largest economy, consultant IHS Automotive estimated.

Mexican auto exports to the U.S. more than quadrupled from 1993 to 2013 as output almost tripled, buoyed by lower tariffs under the North American Free Trade Agreement.

Three plant openings in four months — by Nissan, Honda and Mazda — will supply the final push for Mexico’s leap past Japan, which as recently as 2008 shipped almost twice as many cars to U.S. consumers.
“It’s certainly a low-cost place to produce and there’s a lot of comfort with the caliber of the workforce in Mexico,” Ron Harbour, a manufacturing analyst and partner at consultant Oliver Wyman, said in a telephone interview. “In the late 80s and early 90s, what was coming in from Japan was overwhelming compared with what we thought about from Mexico back then. Obviously, things have changed.”

Cranking out small cars such as the Honda Fit and Nissan Sentra, the new factories will boost Mexico’s share of the $150 billion U.S. import market for passenger vehicles and light trucks. Made-in-Mexico autos sold in the U.S. will reach 1.69 million this year, topping the 1.51 million Japan-built vehicles.

By 2015, U.S. sales of autos from Mexico may climb to 1.9 million, topping Canada’s 1.87 million.

“Passing Japan as a U.S. supplier has been in the works for quite some time, particularly since the Mexican plant announcements a few years back,” Guido Vildozo, an IHS Automotive analyst based in Lexington, Mass. said. “It looks like there’s a possibility Mexico may pass Canada next year.”

For Mexico, the significance of growing exports goes beyond bragging rights over manufacturing prowess. Autos, trucks and parts accounted for 19 percent of Mexican exports during 2013’s first 10 months, up from 17 percent a year earlier, the Mexican Automobile Industry Association reported.

The industry has grown so large that it generates more foreign exchange than oil or money sent home by Mexicans living abroad.