Mexican Automotive Industry

Eduardo J. Solís

Executive PresidentMexican Automotive Industry Association

Mexican Automotive Industry

• Contributes with 3.5% of total GDP and 19.8% of manufacturing industry GDP.

• Impacts more than 23 industrial sectors.

• Employs13.4% of total industrial labor (2010).

Automotive GDP in Mexico

Light VehiclesAssembly Plants in Mexico

Source: AMIA.

New plants announced:

Research Centers andAuto Test Tracks in Mexico

Source: Unidad de Inteligencia de Negocios – PROMEXICO.

Investment• Mexico's automobile and auto parts manufacturers represented 20.8% of total

foreign direct investment (FDI) in 2012.

• Automobile and auto parts industries investment for 2006-2012 period added 13.283 billion dollars, an 8.8% share of total FDI received in Mexico during that period.

Automotive Foreign Direct Investment(million dollars)

Production and Exports

• Mexico is ranked as the 8th vehicle manufacturer and the 4th exporter in the world.

Source: ANFAVEA, AMIA, FOURIN y ADEFA. Source: JAMA, VDA, KAMA, AMIA, ANFAVEA y ADEFA..

Brazil Mexico Thailand Argentina0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

Light Vehicles Production

Jan-Aug 2013Jan-Aug 2014

Japan Germany Korea Mexico Brazil Argentina0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000Light Vehicles Exports

Jan-Jul 2013Jan-Jul 2014

Mexican Automotive IndustryProduction and Exports

• 2013:– Contributed with 3.5% of total world production.– More than 80% of total production goes to foreign markets.– Contributes with 22.5% of total value of Mexican industry sector exports.

Light vehicle production

2007 2008 2009 2010 2011 2012 2013 Jan-Aug 2013

Jan-Aug 2014

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

2,02

2,24

1

2,10

2,80

1

1,50

7,52

7 2,26

0,77

4

2,55

7,55

0

2,88

4,86

9

2,93

3,46

5

1,98

6,57

9

2,12

8,63

4

domesticforeing

Light vehicle exports

2006 2007 2008 2009 2010 2011 2012 2013 jan-aug 2013

jan-aug 2014

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

1,53

6,77

7

1,61

3,31

3

1,66

1,40

6

1,22

3,33

3

1,85

9,51

7

2,14

3,88

4

2,35

5,56

4

2,42

3,08

4

1,58

0,72

4

1,73

2,26

2

Source: AMIA, with member’s data.

Production of vehicles and trucks

ImportedNational

Gross value added

33.9% 36.1%

30.0%

Production Value *

Intermediate demand

66.1%

• 66.1% content of vehicle produced in Mexico is supplied or added domestically.

Source: INEGI. Sistema de Cuentas Nacionales. Matriz de Insumo-Producto. Matriz simétrica a precios básicos, 2008. * Production Value = Intermediate demand + Gross value added

Mexico IS the second major supplier of light vehicles for US market

• 11.1% of US domestic market is supplied with Mexican vehicles (January-august 2014)

• Mexico is second vehicle supplier only after Canada, (January-august 2014).

Automotive Trade

• The automotive trade is positive, in 2013 it was 38.77 billion dollars.

• In 2013 automotive exports were 1.7 times crude oil exports and 3.3 times of remittances.

• The automotive trade was 4.5 times the oil products trade.

Source: BANXICO.* Automotive includes: 8702 - Vehículos automóviles para el transporte => 10 personas; 8703 - Automóviles tipo turismo; 8704 - Vehículos para transporte de mercancías; 8706 - Chasises con motor; 8707 - Carrocerías; 8708 - Partes y accesorios de vehículos; y 8711 - Motocicletas.

19931995

19971999

20012003

20052007

20092011

2013

jan-ju

n 2014 -

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

5,3

33

5,3

15

8,2

16

9,4

36

8,4

99

9,3

08

10,

554

10,

970

10,

906

9,0

88

9,8

02

8,8

44

9,0

89

13,

330

14,

411

15,

346

13,

202

23,

760

28,

917

32,

244

38,

774

20,

782

23,

094

Automotive Trade*

Mill

ion

dolla

rs11%

627%

Remunerations

Remunerations in the automotive industry are more than double those of the manufacturing factor.

Automotive and trucks

manufacture

Auto parts manufacture

Manufacture industry

- 5,000 10,000 15,000 20,000 25,000

21,582

12,162

9,354

Pesos per month

Source: INEGI. Censos económicos 2009.

* Las remuneraciones consideran el promedio de todo el personal ocupado incluido en nómina, incluye sueldos salarios y prestaciones.

When the OEM’s decide for their location of new

investments … Why Mexico?

5 major elements that are making Mexico attractive for major investments

i. Geographic Location.

ii. Zero tariffs in major markets - Network of trade agreements

with major regions around the world -.

iii. Strength of the automotive supply chain.

iv. Young and eager to learn human resources (technicians and

engineers).

v. Economic Stability.

…and very important: the Government is a major partner to help

land investments!

… and the opportunity in the supply of auto parts.

Industry Location (T1 Suppliers)- Illustrative -

Source: AMIA with INA’s data

Supply Capacity

Source: PROMEXICO. The Auto Parts Industry, Business Intelligence Unit.

Supply Capacity

Source: PROMEXICO. The Auto Parts Industry, Business Intelligence Unit.

Autoparts importsin United State

18

Others

France

India

Italy

Taiwan

Korea

Germany

China

Japan

Canada

Mexico

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000

3,126

378

654

668

1,361

4,224

4,875

6,991

8,792

9,197

17,053 2013

2012

Million dolars

Source: Departamento de Comercio, Estados Unidos.It is consider, 8708: Parts and accessories for tractors, public-transport passenger vehicles, motor cars, goods transport motor vehicles and special purpose motor vehicles

Market value and investmentopportunity in the supply chain in Mexico

• 71% of total demand for processes is imported, therefore, there are huge investment opportunities for foreign companies.

• Some of the most demanded processes are stamping, casting, forging and machining.

The opportunity

described in the top ten

supply processes for the

automotive industry,

which account for 85% of

the opportunity identified

by ProMéxico.

Source: PROMEXICO. The Auto Parts Industry, Business Intelligence Unit.

PROMEXICO’s calculations.Data in billions of dollars.

Domestic yearly sales

Source: AMIA, with member’s data.

ene00-dic00 may01-abr02sep02-ago03 ene04-dic04 may05-abr06sep06-ago07 ene08-dic08 may09-abr10sep10-ago11 ene12-dic12 may13-abr14 -

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000 Annualized sales

Ligh

t ve

hicl

es

Domestic market: similar countries

Source: ACARA, AMIA, ANFAVEA, ANPACT, World Bank, IBGE, INEGI and INDEC.

2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

5

10

15

20

25

8

23

9

18

109

Argentina Brasil México

Ve

híc

ulo

s p

or

ca

da

mil

ha

bit

an

tes

Main Challenge: Domestic Market

Main reasons explaining the gap between sales and market potential:

• Indiscriminate Import of used vehicles from USA

• Little financing to promote vehicles sales

Imported used vehicles

2005 2006 2007 2008 2009 2010 2011 2012 2013 jan-aug 2013

jan-aug 2014

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

776,

077

1,57

5,15

0

1,29

1,84

5

1,03

1,04

8

272,

909

470,

483

596,

889

458,

114

644,

209

424,

718

356,

123

years

Use

d ve

hicl

es im

port

ed *

Δ -16.2%

Source: AMIA whit SAT data.* Consider used vehicle imported on the border, pick ups and general vehicles.

Challenges and opportunities ahead

• Mexico will remain as an important world’s export base, manufacturing highly competitive vehicles.

• Auto parts industry will keep its place as a major exporter. However, local supply chain still needs to be strengthen (tier 2 and tier 3).

¡ T H A N K Y O U !

Eduardo J. Solís Sánchez

PresidentMexican Automotive Industry Association

(55) 5272-1144esolis@amia.com.mx