Mexico's place in global automotive supply and demand

Without a doubt, Mexico's manufacturing sector has seen steady improvements in recent years as foreign companies invest in the country, creating more jobs for highly-skilled Mexican workers and boosting the supply of goods. At Mexico's recent Auto Industry Conference, many speakers gave presentations about the strength of Mexico's automotive sector, but one, "A Regional Market Outlook in a Global Perspective" from George Magliano, senior automotive economist for IHS Automotive, spoke about Mexico's place in the global automotive sector. According to the presentation, global gross domestic product (GDP) growth is on the rise, and while Latin America may not lead the way, the region will remain a key player in the industry well into the future.

Getting ahead
According to Forbes, automotive manufacturing in Mexico is strong enough to drive jobs out of the U.S. More companies are expanding to Mexico to take advantage of the country's low cost manufacturing climate as a way to optimize production while keeping expenses in control. The New York Times reported Mexico's more competitive manufacturing environment is causing Mexicans to not only stay in the country, but is encouraging foreigners to immigrate. Mexico's manufacturing sectors are growing in prominence in North America and Latin America, but the country may still have a long way to go, according to Magliano. 

Magliano presented data on the global economy's acceleration, and showed that China, the U.S., the U.K. and Australia are the leaders of global auto sales. While Mexico's vehicle output remains strong, much of its products are exported to other markets, resulting in it leading supply rather than demand. Light vehicle production is set to remain just slightly above sales over the rest of the decade until 2020. In fact, Mexico's vehicle use remains low, with slightly higher vehicle penetration in 2012 than Russia. Global production volume will steadily rise until 2020, according to data Magliano presented, even though capacity utilization may fluctuate. 

Compared to the rest of North America, Mexico's GDP will rise by 2016 to become even higher than Canada's. In addition, Mexico's light vehicle production will overtake Canada's, which is set to decline, within the next few years as more North American companies choose to manufacture in Mexico.

The bottom line is Mexico's growing competitiveness on a global scale. It may take additional investments from foreign companies and time for Mexico's automotive industry to become a true global market leader. However, while demand for vehicles within Mexico is lower than other countries', Mexico's output is set to exceed Canada's and may even result in Mexico producing more cars than China. According to Magliano, Mexico's vehicle production is only slightly below projected North American volume levels, meaning Mexico is on track to supply the growing demand for vehicles.

Mexico's manufacturing climate is strong, and it will continue to remain strong well into the future. With increased foreign investment, Mexico's automotive sector will continue supplying the growing global demand for vehicles.