Auto_Parts_Industry

Mexico: Auto Parts & Supplies Industry
Page 1 of 5
Monica Martinez, Patrick Hess
August 07
Summary
Mexico presents a growing diversity of opportunities for U.S. exporters of auto parts and supplies. Due to the
large-scale automotive vehicle production in Mexico and the growing aftermarket industry for auto parts, Mexico
presents two sizeable and promising sub-sectors within the auto parts and supplies industry. Mexico is the
world’s eleventh largest automotive producer and is forecasted to rank fifth by 20111
; as such, there is great
demand for assembly parts and supplies that are needed in the production process. In Mexico, post market
buyers of auto supplies and parts increasingly demand more sophisticated products – similar to what U.S. buyers
now commonly seek. Together, these two groups pose great potential and already comprise a tremendous part of
the Mexican economy, generating around 7.5% of GDP1
. Additionally, market saturation of simple, mass-
produced auto products has left little desire to compete with low-cost manufacturer countries, like China.
Regardless of the sub-sector in which a firm seeks entry (post market consumers or large-scale automotive
vehicle producers), those that intend to export sophisticated and innovative goods to Mexico’s auto parts and
supplies industry possess great potential for success.
Market Demand
Mexico already presents a rather favorable market for U.S. exporters of auto parts and supplies. The United
States benefits from its proximity and free trade environment to quite handedly place itself as the number one
exporter to Mexico in this sector (see pie chart below)2
. Nonetheless, for this market dominance to simply be
maintained, modernization and
continued advancement are needed.
Although sizably trailing the United
States, Japan, China and Canada
increased their auto parts exports to
Mexico by 93.75%, 48.98% and
29.80% respectively from 2005 to
2006. Considering China’s low-cost
comparative advantage and
Canada’s equally beneficial trade
relationship with Mexico (i.e.
NAFTA), this $12.15 billion import
market (which still excludes a
number of niche market auto
supplies) remains actively
competitive
2
.
Mexican Importation of Auto Parts/Accessories (2006)
74%
6%
11%
5%3%1%
United States Japan Germany
Canada Brazil China
Mexico provides a large auto
manufacturing market to which foreign auto suppliers can provide inputs for domestic production. Initially, the idea
of Mexico as an auto producer may seem peculiar. One does not think of any particular Mexican firm when
identifying automobile manufacturers; however, the contrary is true. Many manufacturers have set up large-scale
1
U.S. Commercial Service, “Automotive Manufacturing Industry.”
https://www.buyusa.gov/mexico/en/automotive_manufacturing.html.
2
Mexican Secretary of Economy. http://www.economia.gob.mx/. Note: uncited statistics come from this source also.
export.gov
The U.S. Commercial Service – Your Global Business Partner. 800-USA-TRADE

Page 2 of 5
operations in Mexico. In result, nearly two million automobiles were produced in Mexico in 20063
. Firms like
General Motors, Nissan and Volkswagen have installed vast manufacturing facilities to generate production for
this important sector. Impressively, these three foreign companies produced greater than 66% of the 962,472
vehicles produced in Mexico throughout the first half of 20074
. In fact, Mexico supplies so many automobiles
through its domestic production that over 78% have been exported during 2007 as of July 315
.
These vehicle exports from Mexico translated to $17.4 billion in export sales from Mexico during 2006, 84% of
which went to the U.S. and Canada. Since NAFTA qualifies any finished light vehicle or engine that is composed
of at least 62.5% American, Mexican or Canadian products to be duty free, an incredible advantage is granted to
U.S. suppliers of inputs to these Mexican made vehicles. Mexican manufacturers want to ensure that the
composition of their vehicles is 62.5% NAFTA products. Meeting this qualification allows the manufacturer to
access the enormous market of the U.S. and Canada without tariffs. The same logic applies to auto parts
manufactured in Mexico. NAFTA qualifies auto parts as duty free so long as at least 60% of the inputs are
American, Canadian or Mexican.
The type of auto part or supply
demanded nearly always depends
on the type of automobile in need of
such a product. Not only is this
important to know when supplying
domestic automobile production in
Mexico but it can also prove
valuable for aftermarket sales of
auto parts. The graph to the right
indicates the composition of light
vehicle sales in Mexico from
January to November 2006
6
. The
vast majority of these automobiles
are most likely still being used; as
such, they will become increasingly
in need of parts and supplies in
order to maintain and enhance their
operation. Considering the 18%
growth in passenger vehicle import sales during 2006 (to reach an import market size of $9.27 billion) 2
, knowing
that SUVs have become just as popular as midsize cars is critical when gauging which auto parts will serve a
firm’s bottom line best.
Vehicles Sold in Mexico (Jan 06 - Nov 06)
35%
7%
4%
18%
35%
1%
Midsize cars Compact cars Luxury cars Trucks SUVs Sports cars
Best Prospects
A growing economy and continuing integration with the American market have caused a shift in the most preferred
types of auto parts and supplies. The greatest potential for an automotive parts and supplies producer in the
United States lies within these shifting preferences. Mexico displayed an impressive 6.5% GDP growth rate from
2002 to 2006 all while maintaining manageable inflation7
. As well, 40.5% of the population is under 20 years old
export.gov
3
Asociación Mexicana de Distribuidores de Automores, A.C. “Reporte Estadística (Anexo), Diciembre 2006.”
http://www.amdaautomotor.org/SACSV2/XStatic/amda/docs/espanol/reporteestene07.pdf.
4
Asociación Mexicana de Distribuidores de Automores, A.C. “Reporte Estadística, Junio 2007.”
http://www.amdaautomotor.org/SACSV2/XStatic/amda/docs/espanol/reporte_estadisticojun007.pdf.
5
Asociación Mexicana de la Industria Automotriz, A.C. “Julio presenta un major panorama en los indicadores de la
industria automotriz.” http://www.amia.com.mx/estadisticas.html.
6
Asociación Mexicana de Distribuidores de Automores, A.C. “Mercado Automotor: análisis y reportes estadísticos
febrero, 2007.” http://www.amdaautomotor.org/SACSV2/XStatic/amda/docs/espanol/mercado_automotor_feb_07.pdf.
7
World Bank. “2006 World Development Indicators.” http://devdata.worldbank.org/wdi2006/contents/home.htm.

Page 3 of 5
export.gov
and nearly 60% is under the age of thirty. These socioeconomic factors combine to create a growing consumer
base with increasing financial capacity to afford a greater variety of auto parts and supplies.
The replacement market for standard auto parts will remain in place so long as vehicles continue to be sold;
therefore, many of such products remain best prospects for exporters to Mexico. Yet overall, the more
technologically advanced and value-enhancing products will prevail as the Mexican economy continues to
strengthen in its current fashion. Due to these changing consumer preferences and the position in which a high
cost, capital intensive producer, like the U.S., is placed, the best prospects for U.S. exporters of auto parts to the
Mexican market are as follows (listed alphabetically):
• Air conditioning parts and accessories: In the first quarter of 2007, Mexico imported 87.2% more
automotive air conditioning parts and accessories compared to the same quarter in 2006. And the U.S.
posted a 117.8% increase in export sales to Mexico in the same time period. A similar pattern has been
seen in each of the last three years. Due to this unprecedented growth, air conditioning parts and
accessories appears to be an $85 million a year industry for 2007.
• Brake systems: This is an $867.5 million import market. In 2006, nearly 22% of these imports came in the
form of disk brake systems, an example of a more sophisticated product within this genre. The United
States provides 69.2% of Mexico’s imported disc brakes, of which Mexico imported 15% more last year.
• Engine replacement parts (rings, pistons, carburetor parts, fuel injection, etc.): This ever-needed and
reliable sector creates demand for its parts that corresponds with the demand of vehicles. So long as
consumers continue to buy cars, these products will remain integral to the auto parts & supplies industry.
Last year, the driving force behind these replacement parts – larger piston engines – created export sales
to Mexico from foreign countries worth over $1.34 billion, 74% of which came from U.S. exporters (an
87.4% annual increase). This indicates a tremendous, growing market that continually needs
maintenance. In addition to engine parts, both replacement and original input products for electrical
systems and transmissions pose good opportunity for U.S. exporters.
• GPS systems and accessories: With a similar logic to that of providing hybrid vehicle accessories, GPS
navigational equipment is an automotive item that will become commonplace in Mexico in the near future.
Fortunately for vendors, such systems and their accessories can be sold both pre and post market. All
that impedes growth is the lack of fuller navigational information technology. Once this information
technology becomes adequately gathered, one should expect to see these products in higher end car
almost immediately.
• Hybrid vehicle accessories/inputs: Mexico is following the same trend that the United States has set.
According to JD Power and Associates, hybrid vehicles will comprise 5% to 10% of the automobile market
in the U.S. by 20158
. Who is to say that Mexico would not follow suit? There is already a long waiting list
to buy the Toyota Prius in Mexico and both Honda and Ford have recently introduced hybrid alternatives
to the Mexican market9
. Additionally, the Mexican government is offering incentives to definitive (versus
temporary) importers – and, in turn, to consumers – of hybrids. As of the fiscal year 2007, the tax applied
to imported vehicles with combustion engines, which is normally 2.6% of the automobile’s value, has been
lowered to a mere 0.16% for hybrids9
.
• Polishing waxes & paintjob restoration: With a growing concern for cosmetic design of their automobiles,
Mexicans are more and more eager to purchase products and services that aesthetically improve their
cars, trucks and SUVs. Something as simple as maintaining a paintjob through the use of car wax has
seen remarkable returns. The U.S. only continues to increases its 94% share in the $56.8 million a year
import market of polishing wax products. The product that enhances these cosmetics (i.e. paint, wax,
etc.) and the manner in which it maintains, restores or improves the look of a vehicle (i.e. the service) are
both emergent markets that warrant attention from exporters.
• Rims and tires: Tireless wheels (more commonly known as rims) posted $109.4 million in export sales to
Mexico in 2006, 65.75% of which came from the United States. Mexico imported nearly 20% more rims in
8
Alianza automotriz (July 2007), “Motores híbridos: Al rescate de la ecología” pp. 22-25.

Page 4 of 5
export.gov
2006 than in 2005. In 2006, Mexico imported $548.4 million worth of new motorcar tires. During 2006,
the near 25% export sales growth of tires from the U.S. coincided nicely with the entire Mexican import
market’s 23% growth. As with rims, American manufacturers benefit from the majority of these import
sales transactions in Mexico.
• Sophisticated alarm systems (e.g. vehicle tracking systems): Considering the 13% upsurge in vehicle
thefts in Mexico during the first quarter of 2007 (compared to the same period in 2006)9
, consumers are
increasingly seeking out alarm systems that work more effectively than what is currently available. Last
year, 54% of the $9 million in vehicle alarm systems that Mexico imported arrived from the U.S. In this
same time frame, this import market grew 34.2% and U.S. exports to Mexico increased 47.8%.
• Sound equipment: Radio receivers for vehicles (most often with CD or mp3 capabilities) alone generated
$361.6 million worth of exports from foreign producers to Mexico. The U.S. sold $227.7 million of these
exports. Other increasingly popular car audio equipment, such as woofers, amps and speakers, are not
included in this figure and they all pose great growth potential for firms supplying such products.
• Suspension systems: The U.S. maintains seven times the export sales to Mexico than its closest
competition in this category (Japan). The $36 million in suspension systems that Mexicans imported
during 2006 is 91.4% greater than the value imported throughout 2004. As suspension systems’
technical capabilities improve, so do prospects of selling such products to the Mexican market.
Market Entry
The best way for American firms to enter the Mexican market is to first identify which type of clients they are
pursuing. This client may be an all-encompassing automotive vehicles producer that requires many inputs.
Conversely, the client may be an aftermarket supplier of pre-assembled auto parts and supplies. In either
scenario, a distributor, partner or buyer within Mexico must be located. As well, to supply throughout the country,
more than one local distributor may be needed. Also, manufacturers in Mexico will expect product warrantees and
technical support especially in the early phases of the business relationship.
NAFTA provides free trade for nearly all products and services between the U.S. and Mexico, and exporting any
of the products and services mentioned in this report are no exception. To receive this preferential treatment,
qualifying products must obtain a NAFTA Certificate of Origin, which can be issued by authorized government
agencies, producers, exporters and commercial chambers/associations of commerce. For more detailed
information, visit the U.S. Trade Information Center’s homepage at http://tradeinfo.doc.gov.
The U.S. Commercial Service can assist to initiate this relationship. Our knowledgeable, experienced staff has
the connections and market know-how to aid in this often-difficult process of entering a foreign country’s import
market. Our offices in Mexico are located in Mexico City, Monterrey, Guadalajara and Tijuana. We provide
numerous services to support our U.S. clients, such as investigating potential partners and the current market
environment, overcoming governmental impediments through advocacy, and scheduling meetings between the
U.S. exporter and possible Mexican purchasers and distributors of the service/product at hand. For more
information on opportunities in the auto parts and supplies industry please contact Commercial Specialist Monica
Martinez by email at Monica.Martinez@mail.doc.gov or phone at (52-55) 5140-2628.
Trade Events
PAACE Automechanika
Centro Banamex, Mexico City
July 9 - 11, 2008
http://www.paaceautomechanika.com
9
Alianza automotriz (July 2007), “Los vehículos más robados” pp. 19.

Page 5 of 5
export.gov
Resources & Contacts
Mexican Association of Automobile Distributors (AMDA)
http://www.amdaautomotor.org/SACSV2/XStatic/amda/template/index.aspx
Mexican Automotive Industry Association (AMIA)
http://www.amia.com.mx/index.html
National Auto Parts Industry (INA)
www.ina.com.mx
National Bank of Foreign Trade (Bancomext)
http://www.bancomext.com/Bancomext/index.jsp
National Association of Auto Parts Wholesalers (ANAMAPA)
http://www.portalautomotriz.com/directorio/?mode=ver_empresa&id_empresa=1519&id_tipo_negocio=30&ve
hiculo=1&id_especialidad=354
American Chamber of Commerce of Mexico (AMCHAM)
http://www.amcham.com.mx/
U.S. Department of Commerce’s Trade Information Center (TIC)
http://www.export.gov/exportbasics/ticredirect.asp
For More Information
The U.S. Commercial Service in Mexico City can be contacted via e-mail at: Monica.Martinez@mail.doc.gov;
Phone: (52-55) 5140-2628; Fax: (52-55) 5140-1115; or visit our website: www.buyusa.gov/mexico.
The U.S. Commercial Service — Your Global Business Partner
With its network of offices across the United States and in more than 80 countries, the U.S. Commercial Service of
the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S.
companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the
U.S. nearest you by visiting http://www.export.gov/eac.
Comments and Suggestions: We welcome your comments and suggestions regarding this market research.
You can e-mail us your comments/suggestions to: Customer.Care@mail.doc.gov. Please include the name of
the applicable market research in your e-mail. We greatly appreciate your feedback.
Disclaimer: The information provided in this report is intended to be of assistance to U.S. exporters. While we make every
effort to ensure its accuracy, neither the United States government nor any of its employees make any representation as to the
accuracy or completeness of information in this or any other United States government document. Readers are advised to
independently verify any information prior to reliance thereon. The information provided in this report does not constitute legal
advice.
International copyright, U.S. Department of Commerce, 2007. All rights reserved outside of the United States.

Auto_Parts_Industry

Recommended

Recommended

More Related Content

What's hot

What's hot (19)

Viewers also liked

Viewers also liked (8)

Similar to Auto_Parts_Industry

Similar to Auto_Parts_Industry (20)

Auto_Parts_Industry