Mexico to Boost Auto Output 38% Within Three Years, Agency Says

 

Bloomberg News
By Nacha Cattan and Brendan Case on August 28, 2012

Mexico will boost annual auto output by 1 million vehicles within three years, a 38 percent jump from last year, as foreign manufacturers use the country as an export base, said Carlos Guzman, head of the nation’s investment promotion agency.

Investments already announced by carmakers will allow Mexico, the world’s fourth-largest auto exporter, to increase annual production from last year’s 2.6 million units, Guzman, president of ProMexico, said in an interview yesterday at Bloomberg’s Mexico City office. Surging car and aerospace sales will help Mexican exports climb by about 15 percent this year to a record of around $400 billion, he said, surpassing a $350 billion high reached last year.

Mexico’s economy is proving resilient as its auto industry booms, with both vehicle production and exports reaching their highest levels in the first seven months of the year for any January to July period, the nation’s Automobile Industry Association, or AMIA, said on Aug. 6. New plants announced by companies such as Mazda Motor Corp. (7261), Nissan Motor Co. (7201) and AudiAG (NSU) will help the nation close the gap with Korea, the biggest exporter after Germany and Japan, Guzman said.

“Other companies are exploring the possibility of opening facilities in Mexico,” Guzman said. “We expect a very good period of five to seven years in Mexico in terms of growing exports” for cars, he said.

Auto Growth

Manufacturers are opening new plants in Latin America’s second-largest economy as wages in China rise and higher oil prices increase costs for Asian companies looking to tap consumers in the U.S., the world’s largest economy.

Car companies announced $5.3 billion in new investmentsfrom January through April and $2.8 billion last year, according to the Economy Ministry. Pirelli & C. (PC) SpA and Nippon Steel Corp. (5401) have said they plan to open new parts plants focused on the auto industry.

Mexico’s gross domestic product beat economists’ forecasts for growth in the second quarter, expanding 0.9 percent from the first three months of 2012, an annualized rate of 3.5 percent, as exports increased 5.8 percent from a year earlier. Growth has topped Brazil’s for the past year with the economy in the U.S., the buyer of 80 percent of Mexico’s exports, projected to expand 2.15 percent this year, faster than 1.8 percent in 2011, according to the median estimate of economists surveyed by Bloomberg.

Mexico will attract foreign direct investment of as much as $20 billion this year and $20 billion to $25 billion annually in coming years, Guzman said.

Foreign investment fell 9.2 percent in the first half of the year to $9.62 billion from preliminary figures for the same period in 2011, Mexico’s Economy Ministry said on Aug. 23. The nation received $20.4 billion in investments last year.

Guzman said that aerospace exports are also expanding and probably will rise to as much as $5.2 billion this year from $4.5 billion in 2011, citing estimates from the Mexican Aerospace Industry Association.

“In 15 to 20 years, we will be talking about aerospace manufacturing in Mexico like we are talking about automotive manufacturing” today, he said.