Being prepared for the next Mexican automotive boom

Vehicle production in Mexico is growing by 9 percent p.a. But supplier business lags behind.

Over the last five years, Mexico’s light vehicle production has been on a remarkable growth track driven by exports to the US with a compound annual growth rate (CAGR) of 8.4% since 2010. This growth is expected to continue with 41% more capacity by 2020 to supply existing and new export markets.

With the entry of new brands like Audi, BMW and Infiniti the product mix is expected to shift from 4 to 10% share of premium vehicle. Additionally, the positive outlook is also reinforced by OEM investments with more than USD 17 bn.

With regard to the supplier landscape, Mexico has a very well established Tier 1 supplier base but suppliers lack technological know-how and certain product offerings like body, powertrain and chassis. In those product offerings supply is heavily ensured by imports to meet the gap in supply.

The unsatisfying situation is intensified by a devaluation of the Mexican Peso and product and process supply base offerings with a strong regional focus. Looking into the future, the growth in auto parts is only expected with a CAGR of 1% till 2020 in comparison to a CAGR of 9% in light vehicle production. This creates a growing demand-supply gap.

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Source: Roland BergerGAI