Increasing Consumer Demand for Small Cars Contributes to Unstoppable Growth of Mexican Auto Exports

In spite of the continued difficulties faced by the U.S. auto industry, Mexico's auto industry continues to show remarkable growth and expansion. In the first eight months of 2010, U.S. car sales registered a growth rate of 8.4%, while Mexico sold 69.4% more vehicles during the same time period.

The share of Mexican cars in the U.S. market advanced 6% to more than 11% in late August 2010. “Exports during this time frame represented the second highest export level in the history of our country, only exceeded by the export level reached in June 2010,“ said Eduardo Solis, president of the Mexican Association of Automotive Industry. "Obviously, we are having better penetration in terms of product range."

Many experts believe that Mexican exports registered a high growth rate in 2010 largely due to the growing production of compact cars -- as a result of the shift in consumer preference towards smaller cars that offer better fuel consumption. According to Hidenori Tsukamoto, director of exports Nissan Mexicana, "energy prices have made U.S. consumers increasingly turn towards more economical vehicles with lower fuel consumption."

"We are seeing an emerging phenomenon in the production of compact cars," said Thomas Karig, vice president of corporate relations and strategy for Volkswagen of Mexico. "Mexico has expanded its range of products and is entering a niche market in the U.S. that used to be unappealing, but is becoming increasingly important."

In general, smaller cars deliver smaller profit margins. As a result, the growth in the production of compact vehicles in Mexico is being fueled primarily by auto manufacturers' drive for lower production costs where companies can take advantage of significantly lower manufacturing overhead and labor costs. The proximity of Mexico to the U.S. market also keeps shipping and other transportation costs low.

In addition to offering lower production overhead, Mexico also has more than 30 free trade agreements with European, Asian and Latin American countries. Autos manufactured in Mexico may enter these markets without requiring additional import fees, making auto production in Mexico even more appealing to manufacturers.

Spanish Companies Anticipate Expanded Investment Opportunities in Mexico

With Mexico's economic growth potential forecasted at more than 4.5%, Spanish companies anticipate opportunities for investments in the Mexico market to expand rapidly.

According to Angel Cano, president and COO, Banco Bilbao Vizcaya Argentaria (BBVA), recent indicators show that Latin America has the capacity and endurance to successfully navigate global economic problems.

"Mexico is an example of effective management over the last few decades,” said Cano. “The country has demonstrated endurance in terms of its macro stability, with a sound financial system since 2008." Cano attributes Mexico’s continued economic strength and potential for increased Spanish investment to the country's openness to foreign markets and effective integration into the overall global market.

Queretaro Being Considered for New Sikorsky Aircraft Plant Location

Sikorsky Aircraft Corporation, a world leader in the design, manufacture and service of military and commercial helicopters, is currently evaluating potential locations for a new manufacturing facility which will enable the company to better leverage low-cost resources for the further expansion of aircraft production. Potential plant locations are currently being evaluated in China, India, Brazil and Mexico, including possible sites in the Mexican state of Queretaro.

In a recent trip to the U.S., Queretaro Governor Jose Calzada Rovirosa met with executives from Sikorsky, which is part of the Stratford, Connecticut-based United Technologies Corporation. The Governor’s visit included a tour of the Stratford plant and discussions regarding Sikorsky's goals for expanding manufacturing operations in new markets.

"Sikorsky needs to increase its productivity while reducing costs to remain competitive and retain its leadership in the global helicopter market,” said Governor Rovirosa.

British Companies Explore Investment in Sonora Tourism

As one of Mexico’s growing tourist destinations, Sonora is attracting strong interest from British companies seeking new investment avenues in the tourism arena.

Adriana Lopez, Trade and Investment Attaché at the British Embassy in Mexico, visited Sonora to evaluate areas of opportunity for British investors. Lopez said that British executives are interested in investing in tourism in Mexico, especially in marinas and ports, as well as in the sports and information technology sectors. Lopez also indicated that planning is underway for an event to be held in the United Kingdom. The event will be coordinated by the Mexican and British Embassies in London and Mexico and will feature products and services offered to investors by Sonora.

Mexico's Aeolian Industry Shows Strong Profit Potential

As one of the world's most profitable countries for the production of Aeolian energy, a renewable wind energy source, Mexico has the potential to generate 44,000 megawatts, based on projections made by C-Estrategia from the Mexican Institute for Competitiveness (Instituto Mexicano para la Competitividad: IMCO).

Research findings show that the states of Oaxaca, Tamaulipas, Chihuahua and Baja California are among the largest sources of Aeolian wind energy. Francisco Fernandez-Castillo, C-Estrategia CEO, indicated that Mexico demonstrates significant potential for the rapid expansion of wind energy generation and is one of the most profitable countries for Aeolian production.

According to Fernandez-Castillo, while the U.S. currently has the world's most developed Aeolian projects, Mexico's Aeolian capacity is the most under-utilized. Mainly concentrated in the Mexican state of Oaxaca, only 170 megawatts of Aeolian energy have been developed, which represents approximately 0.38% of the total Mexican Aeolian generation capacity.

 

Sources of Information: In preparing this document, the following sources of information, among others, have been utilized: Sentido Comun, North American Super Corridor Organization (NASCO) Newsletter, and Mexico Now Newsletter.

January 2011
Building Potential