Friday, June 21, 2024

Investment in automotive manufacturing hits historic high

Foreign direct investment (FDI) in Mexico’s automotive manufacturing industry reached a historic high during the first half of 2023. 

According to data from the Economy Ministry (SE) as reported by El Economista newspaper, Mexico attracted over US $5 billion in FDI in the automotive manufacturing industry between January and June of this year, exceeding the amount invested not only during the same period in the past year, but during any full year on record. The sector greatly contributed to the overall FDI record of US $29 billion seen so far this year.

Cars ready for export in Veracruz
In the first six months of 2023, Mexico’s exports of automotive products increased by 14.2%. (Shutterstock)

During this period, exports of automotive products increased by 14.2%, according to data from the Bank of Mexico (Banxico). Car manufacturing increased by nearly 14%, exceeding the global increase of 8.8% during the first nine months of the fiscal year (which ended June 30). 

In the same period ending June 30, light vehicle production increased 8.8% in annual terms to 65.2 million units worldwide, driven by larger global production volumes. 

The previous highest investment record was recorded in 2019, when FDI in the automotive manufacturing sector reached US $4.3 billion. 

Last year, Mexico’s total exports increased by 16.9% compared to 2021, primarily driven by a 34.2% rise in oil exports and a 15.8% rise in non-oil exports, led by a higher percentage of exports of automotive products, with sales increasing by 9.8% to the United States and 39.6% to other markets. Mexico’s total manufacturing production grew by 5.2% in 2022 compared to 2021. 

Tesla gigafactory rendering for Nuevo Leon, Mexico
Rendering of a planned Tesla gigafactory in Nuevo León. (Tesla)

Despite the surge in FDI, the U.S. auto parts company Adient expects the operating environment to remain difficult for the auto industry for the remainder of the year, as the industry recovers from supply chain disruptions, inflationary pressures and volatility in commodity prices. 

Mexico’s automotive sector is one of the most competitive in the world, according to the newspaper El Economista, with modern infrastructure and a competitive workforce. 

Several notable automotive industry investments have been announced in Mexico so far this year, including US $860 million by BMW to expand its plant in San Luis Potosí and Tesla’s US $5 billion gigafactory in Nuevo León. 

With reports from El Economista

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