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Customer LoginsMexican vehicle market continues to expand with 25.9% y/y growth in June, production and exports also gain
A strong performance in June pushed year-to-date (YTD) sales growth in the Mexican vehicle market to 18.4% year on year (y/y), while production was up 4.1% y/y during the month.
IHS Automotive Perspective
- Significance: Mexico's light-vehicle market continues to post strong gains thanks to favourable macroeconomic conditions. June's sales grew by 25.9% year on year (y/y), lifting year-to-date (YTD) sales growth to 18.4% y/y. The solid sales growth in June also helped production to expand by 4.1% y/y during the month, while exports were up 1.8% y/y.
- Implications: Despite the gains in June, light-vehicle output is still down 3.1% on a YTD basis, while exports are also being challenged by the continued economic woes in Brazil - a major market for made-in-Mexico vehicles. The strongest export market for Mexico remains the United States, to where nearly 75.8% of production was shipped in June. The US was followed by Canada, which accounted for 9.9% of Mexico's production.
- Outlook: IHS Automotive has adjusted its sales forecast for 2016 on the basis of the strong first-half results, now projecting sales this year to reach 1.47 million units, equating to growth of 9.41%. Continuing investment in production facilities will help Mexican output grow steadily and strongly over the coming years, despite the headwinds from the shrinking South American export markets.
Mexico's light-vehicle sales continued to surge at a double-digit percentage rate in June, posting strong growth of 25.9% year on year (y/y), building on the strong gains of 19.2% in May and 24.9% in April. According to latest data from the Mexican Automotive Industry Association (Asociación Mexicana de la Industria Automotriz: AMIA), automakers sold a total of 134,536 light vehicles in the month. Over the first six months of 2016, sales increased by 18.4% y/y to 721,856 units. The market had grown by 19.1% in 2015, reaching 1.35 million units, split between 892,194 passenger cars, up 19.7%, and 459,454 light commercial vehicles (LCVs), up 17.8%. Sales growth in Mexico in 2015 bucked the trend in other global regions, in that passenger car demand increased at a faster pace than LCV demand. IHS Automotive forecasts sales growth of 9.4% in 2016, split 64.5% versus 35.5% in favour of passenger cars.
Nissan (including Infiniti) maintained its position as the best-selling group in Mexico during June with sales of 33,484 Nissan and 190 Infiniti units, an 18.6% y/y gain for Nissan and a 40.7% y/y increase for Infiniti. General Motors (GM), under the Chevrolet badge, retained its position as the second largest seller in June with 29,153 units sold, a gain of 35.4% y/y; GM also remains ahead of Volkswagen (VW) in the year to date (YTD). VW (including Audi, SEAT, and Porsche) sold 20,651 units in June, an increase of 21.4% y/y. Fiat Chrysler Automobiles (FCA) surpassed Toyota to take fourth place with 8,279 units sold, although this was down 0.3% y/y. Despite a 34.3% y/y surge in its sales, Toyota was relegated to fifth place with monthly volumes of 7,824 units. This was enough to keep the Japanese automaker ahead of Ford, which sold 7,779 units in June, up 10.5% y/y. With sales of 6,769 units (up 27.9% y/y), Honda occupied seventh position in June.
Thanks to the strong sales performance, Mexico's vehicle output grew 4.1% y/y in June to 319,122 units, from 306,694 units in June 2015. This was better than the decline of 3.1% y/y witnessed in May, although YTD production is still down 3.1% y/y at 1.67 million units. The recovery in June was led by Nissan, which posted a 6.2% y/y surge in output to 78,125 units. GM (60,239 units) and FCA (46,372 units) also posted gains, albeit smaller, at 1.3% and 5.2%, respectively. These gains were partially offset by 10.7% and 19.7% y/y declines registered by VW (40,951 units) and Ford (35,687 units), respectively.
Mexican light-vehicle exports also changed track and achieved growth of 1.8% y/y to 247,005 units during June. Nevertheless, this slim gain was not enough to offset the declining trend seen earlier this year, and thus YTD exports are still down 5.6% y/y at 1.32 million units. Brazil's economic woes continue to drag down total export numbers, despite strong demand from the United States; over the first six months of 2016, Mexico exported 25,725 fewer units to Brazil than in the same period of 2015. In the same timeframe, exports to Colombia also shrank by 10,433 units. Nissan - the traditional leader in vehicle exports from Mexico - again led the way in June, although its volumes were down 2.1% y/y to 45,157 units. Nevertheless, GM and Ford posted steeper declines of 7.3% and 12.5% y/y, respectively. Exports for FCA were up 5% y/y during the month, but VW reported a 15.9% y/y contraction.
Outlook and implications
Solid domestic sales in June further bolstered growth, and YTD volumes are now up a healthy 18.4% y/y. This is remarkable as the gains come on the elevated levels of 2015, when light-vehicle sales expanded by 19.1%. IHS Automotive forecasts that conditions will continue to improve. Although a moderate pace of sales growth is expected to ultimately become the trend, IHS has adjusted its forecast upwards; we project growth of 6.5% in 2017 and 4.7% in 2018, followed by more modest growth rates in 2019 throughout the forecast period.
The AMIA notes that Banco de Mexico, the Mexican central bank, indicated in June an expectation of economic growth of 2.36% for 2016 and 2.71% for 2017, compared with its May projections of 2.44% in 2016 and 2.84% in 2017. Inflation is now expected at 3.1% in 2016 and 3.39% in 2017, revised from earlier forecasts of 3.11% in 2016 and 3.35% in 2017. According to the AMIA, the economy continues to face the same possible headwinds: weakness of the external market and the global economy, and international financial instability. As Mexico's fortunes tend to mirror those of its neighbour, the US, the current stuttering economic indicators north of the border will need to be watched closely. The AMIA also reported in April that the fifth component of the consumer confidence index, which measures the likelihood of purchases of durable goods, increased by 1.6% compared with a year earlier, to 84.0 points; this was still 21.6% below the level in April 2007, prior to the recession. A supplemental index measuring the likelihood of car purchases increased to 66.1 points, 4.4% higher than in April 2015.
The AMIA has reported that used-car imports remain low, which is a factor in our sales forecast. The slowdown of imported used cars in 2014 and 2015 helped provide some breathing space for new cars. In 2015, imports of used cars fell by 60.6%, the AMIA reported, noting that this was the lowest volume since 2005. Over the first quarter of 2016, however, used-car imports gained by 17.1% y/y to 61,587 units. This figure, however, remained notably lower than the 185,075 used cars imported in the first quarter of 2014 and the 207,645 units imported in 2013. This change is helping to dampen the negative pressures on the domestic market. The association continues to note that 7.75 million used vehicles in the country will have implications for the environment, road safety, and the renewal of vehicles. The AMIA remains concerned that the influx of used vehicles from the US affects the renewal of the vehicle parc, and is encouraging the Mexican government to keep the current practices in place.
Investments by automakers and component suppliers continue, with Ford having announced a new USD1.6-billion small-car plant in early April. BMW broke ground on its new Mexican plant in June, while Honda announced plans in June to increase output of the HR-V in Mexico. Production, although delayed, began in May at Kia's plant, and Audi is on schedule for a September 2016 start to production at its Mexican facility. GM has also started supplemental production of the Cruze in Mexico. Supplier announcements in June came from Inteva and Magneti Marelli. After increasing 9.9% to 3.21 million units in 2014, Mexican light-vehicle production growth was more moderate in 2015, reaching 3.39 million units, up 5.7%. However, as new plants come online in 2016 and 2017, Mexico's output is forecast to reach 4.47 million units in 2018, before passing 5.0 million units in 2024. Mexican production eclipsed Brazilian output in 2014 and is forecast to remain ahead throughout the forecast period.
About this article
The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.