Mexican auto sales increase, Canada to benefit
By Michelle Collins | April 4, 2003
"Vehicle purchases in Mexico advanced by 6 per cent last year to a record 978,000 units, and despite some moderation in early 2003, are expected to power ahead once global economic uncertainty recedes," says Carlos Gomes, Scotiabank's auto industry specialist. "Continued solid gains in Mexico will contrast sharply with declining volumes in the United States and a levelling off of purchases in Canada."
If estimations prove true Mexico's vehicle sales could pass two million annually by 2010, making it one of the ten largest in the world. The increase would also put Mexico above Canada, where sales average 1.7 million units each year.
The growth has been attributed to the North American Free Trade Agreement (NAFTA), which the country has been participating in since 1994. Over the past nine years vehicle manufacturing in the region has increased almost 70 per cent, while economic growth has averaged 4.6 per cent each year.
NAFTA has also led to the elimination of Mexico's auto decree, which created a restricted vehicle and auto parts market. The decree will be fully phased-out on January 1, 2004. In spite of the restrictions Canada managed to export $410 in auto parts last year, a four-fold increase since 1994.
"Starting next year, vehicles assembled in Mexico will no longer be subject to a national content requirement - currently 29% of Mexican-made parts," comments Gomes. "By 2004, vehicles assembled in Mexico will only be required to contain 62.5% of North American parts - i.e. sourced from Canada, the United States or Mexico. The elimination of the Mexican content requirement opens up the Mexican auto parts market and should greatly increase the potential for Canadian suppliers."
In addition to NAFTA Mexico has also signed free trade deals with the European Union and several South American countries including Brazil. The Brazilian agreement will see the two countries exporting vehicles duty-free by 2004.
For a complete version of Canada Auto Report go to http://www.scotiacapital.com/English/bns_econ/bns_auto.pdf.
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