Report: "Mexican Automotive Market: Passenger Cars, Components and Spare Parts 2007/2008 -2010":

With a populaton of about 105 mio. inhabitants, Mexico is the second largest market in Latin America, after Brazil, and one of the largest markets worldwide. Mexico has managed a growth of its economy which today is called the Mexican miracle. With a GDP per capita of 8343 USD and average monthly wages of 581 USD, Mexico has a good position among emerging economies.

Mexico has a longstanding tradtion of car manufacturing. As early as 1930, cars (GM) were assembled in Mexico. Mexico has no own OEM, although some cars are almost seen as local. Today, with about 2 mio. passenger car manufactured every year, Mexico is one of the top car manufacturing locations worldwide.

Mexico passenger car market is characterized through a large, illegal inflow of used cars from the U.S. into Mexico. With closer ties of the Mexican with the U.S. economy, many cars are bought in the U.S. and brought to Mexico by individuals who never register these cars. With the opening of used car imports from the U.S. and Canada which was reversed beginning of 2008, the influx increased further. The imports mainly happen in the Northern regions of Mexico. The new car market suffered from the inflow of used cars and declined over the last years. Starting from 2007, we expect a turnaround of the new car market, but not a fast increase. Although the wealth of the population is increasing, the average Mexican still can not afford a new car and the economic success can hardly make up for the negative impact of the used car imports.

With offical used car imports being equal in numbers to new car sales, the Mexican car parc is increasing fast, but over 1 mio. from 2006 to 2007 and further on for the next years. Since a major share of the increase comes from used cars, there is an immediate effect on the aftermarket. While for very cheap cars imported from the U.S. Mexican consumers will not be willing to spend substantial amounts of money for car service, but for higher-value imports they will. The increasing wealth of Mexican consumers especially influences the behaviour regarding car service. We expect the aftermarket (sale of parts) to grow at almost 6% annually at constant prices over the next years.

The distribution system for spare parts is about to organize, with still very few players acting on a truly national level. Also, chain building in the parts shop and the service stations segment, although it started already, still has a tremendous potential.

Financing of cars is widely used but there is still growth potential. With the average Mexican wages increasing further, financing is the only option for many Mexican to buy a new car.

Mexico is ideally positioned as a production hub for cars and components. Mexico has one of the largest trade agreement networks, only topped by Chile. Through NAFTA, the access to the North American market are much easier, also not yet fully free of restrictions and duties. In about 10 years time, however, free trade will become reality. Through an agreement with the E.U., Mexcio is also able to deliver to European countries on preferential terms. Investments from U.S. and E.U. companies in Mexico today can be made without any restrictions. The automotive industry in Mexico is very well developed so that is no problem in finding qualified labour. With average wages of 581 USD, cost of labour is still low.

In total, the car market and especially the aftermarket are attractive because of its size and its growth potential, respectively. Mexico is also attractive as a production hub to deliver North America, Europe or Latin America. In this aspect, Mexico is one of the main competitiors of the Asian countries.

The major risk in Mexico is the dependency on the U.S. economy. While this has been reduced in recent years, there is still a strong connection between the two economies. With the U.S. economy slowing down, this will also have an impact on Mexico’s consumers.

To prepare this market report, we used primary and secondary research methods: expert interviews and consumer surveys – in particular for the market of automotive parts, which is not covered yet by any substantial statistical data – and standard analysis of secondary information available on the topic. Based on our experience and developed competencies we have built proprietary market models to forecast future market development. The report was compiled in the period from March 2008 to June 2008 and hence includes statistical data until December 2007 and the first quarters of 2008, if available.

For a table of content and a list of figures and tables, please see details below.

Globis is a Germany-based consulting company with broad international coverage regarding strategy development, especially entry strategies into new markets.