Beyond the pending United States-Mexico-Canada Agreement (USMCA) review, growth in Chinese investment and trade in Mexico’s auto sector raises important considerations for Mexico, especially as the country looks to boost industrial capacity in automotive and other industries.
This report from the Asia & Latin America Program is an effort to detail key developments and likely future trends in Chinese engagement within Mexico’s automotive industry. It also considers the various implications for Mexico of certain types of Chinese economic engagement.
Key findings:
Two parallel stories emerge upon careful examination of Chinese activity in Mexico’s auto sector:
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- The Assembly Story: Chinese auto manufacturing in Mexico remains relatively limited to date, despite some high-profile announcements of possible Chinese deals. Of the eleven OEMs currently operating in Mexico, seven of those remains focused on boosting Chinese vehicle exports to Mexico through the establishment of dealerships and strategic partnerships across the country. The four Chinese companies that produce vehicles in Mexico are narrowly focused on basic assembly for sale within Mexico, relying heavily on imports from China of vehicle components. To date, the continued prioritization of basic assembly, made possible by imports of Chinese parts, kits, and vehicles ensures that many jobs and much of the economic benefit stay in China.
- The Parts Story: China’s major parts companies have established in Mexico at an accelerated pace since 2012. Thus far, and accounting for discrepancies in public data on Mexico’s inward FDI, Chinese parts manufacturers have played a more prominent role in the Mexican auto sector than China’s carmakers, whether in terms of foreign direct investment or trade. Like Chinese OEMs, Chinese parts companies in Mexico also rely rather heavily on imports from China.
- The Assembly Story: Chinese auto manufacturing in Mexico remains relatively limited to date, despite some high-profile announcements of possible Chinese deals. Of the eleven OEMs currently operating in Mexico, seven of those remains focused on boosting Chinese vehicle exports to Mexico through the establishment of dealerships and strategic partnerships across the country. The four Chinese companies that produce vehicles in Mexico are narrowly focused on basic assembly for sale within Mexico, relying heavily on imports from China of vehicle components. To date, the continued prioritization of basic assembly, made possible by imports of Chinese parts, kits, and vehicles ensures that many jobs and much of the economic benefit stay in China.
Additionally, Chinese exports, whether of assembled vehicles or parts, are featuring increasingly prominently in Mexico. At this juncture, Chinese companies appear to be favoring direct auto and parts export to Mexico over production in the country, even amid growth in both areas.
