The Mexican Automotive Industry's Long History

September 28, 2012

The Early Years of The Automotive Industry In Mexico

Automobiles first arrived in Mexico City in 1902, totaling 136 that year, increasing to 800 by 1906. This caused the president, Porfirio Díaz, to form both the first Mexican Highway Code and a tax for car owners.  The tax was abolished in 1911 as a result Francisco Madera’s campaign against Díaz during the Mexican Revolution. Shortly after hostilities had ended, beginning 1921, Buick became the nation's first trademark to be legitimately established in Mexico. Mexico's automobile industry dates back to 1925, when Ford also established assembly lines in the country. Ten years later, in 1935, General Motors, the leading vehicle producer in the world at that time, entered the country. By 1938, the Automex Company, which later became Chrysler, activated its operations.


During the 1950s and 1960s, companies from around the world opted to open plants in Mexico. Nissan opened its first manufacturing center in Mexico in 1964, while Volkswagen, Ford and Chrysler also invested in production facilities in the country during that year. By the end of the 1960s many American, European and Japanese corporations were constructing sites in Mexico but some left due to onerous regulations and taxes.


Mexican Economic Downturn

Many carmakers were already functioning by 1961 when the there was a downturn of the Mexican economy occurred. In the early 1960s, government protocols obliged car companies to accumulate inventories in Mexico, using local as well as imported inputs. The idea was to cultivate a national car manufacturing in the country, and to promote job creation and technological advances. Those companies that would not conform to government directives left the country; including Mercedes Benz, FIAT, Citroën, Peugeot and Volvo. The American Big Three (General Motors, Ford and Chrysler) remained along with American Motors, Renault, Volkswagen, Datsun and Borgward.

During the same decade, due to the announcement of the upcoming 1968 Summer Olympics to be held in Mexico, the Government reissued Diaz’s car ownership tax to pay for the construction of new facilities for the event; The tax was, and is to this day, called the Tenencia Vehicular. Collection of the levy also helped to to finance the 1970 FIFA World Cup, also held in Mexico City. Today the tax is variable depending on the car’s value, number of cylinders, type of transmission, air conditioning, and further features. The typical payment is up to 10% of the car’s total value. A second tax exists as well on the purchase of a new vehicle called Impuesto Sobre Auto Neuvo or ISAN (“Tax on new car”), the amount of taxation also depends upon the vehicle’s price. Unlike the Tenecia, this tax is a onetime only payment. Federal law requires all listed car prices on media or dealerships to have the standard 16% VAT tax and ISAN included on the sticker.

Since many Mexican drivers evade paying this tax, the Government started implemented measures to lessen this phenomenon. On 4 March 2011, President Calderón announced Tenencia would be completely abolished by 2012 in all states, but not in the Federal District, which includes most of Mexico City.

In 1986, Ford and Mazda opened the Hermosillo plant and commenced maneuvers with approximately 1,200 workers who built about 240 cars per day. Sedans were some of the first models leaving the Hermosillo plant floor. Hermosillo is considered one of Mexico's pinnacle gems in terms of producing quality vehicles.


Growth of Mexico’s Economy 

From 1977 to 1989, Mexico’s auto industry began to facilitate trade competitiveness. Between 1990 and 1993, the country pursued new policies to deregulate the industry and to make itself attractive to foreign investment.

During the late 1990s the growth of Mexico’s economy spurred increased car sales in Mexico and, eventually, most of the carmakers that had left the country re-established themselves in the country.

Annual passenger vehicle sales in Mexico reached one million in 2005. This encouraged carmakers to offer cars with alternative fuels— automobiles of this kind hadn’t been available in Mexico since the first Volkswagen Caribe diesel-powered was offered in the late 70’s and the early 80’s.


The Mexican Automotive Industry Today (2007-Present) 

Mexican car company, Mastretta, introduced the first domestically manufactured sports car into the local market in May 2007. Production started in January 2010. In 2010, Mexican bus maker, Cimex, stated that it was expanding into the passenger vehicle market and was in the process of developing a pickup truck, which would be Mexico’s first domestic model. The product is expected to enter the assembly phase in 2013.

Currently, 42 carmakers are present in the Mexico with approximately 400 different models. This makes Mexico one of the most diverse automotive markets in the world. With nearly 2.4 million cars built in Mexico in 2011 - most of them exported for sale in other countries - Mexico's rise as an automobile-building dynamo has been proven. As of August 2012, production was up 13.3 percent over the same month last year.


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