We cannot compete, the same companies that sell in Mexico are in Korea, that is why they cannot be sold at the Tier 1 level”.
Alberto Bustamante, director of the INA
A Free Trade Agreement with South Korea is not profitable or useful for the Mexican auto parts industry, since “the same 600 Tier 1 companies” that operate in the Asian country are the same ones that are in our country as suppliers of the vehicle assemblers”, warned the director of the National Auto Parts Industry (INA), Alberto Bustamante.
“We cannot compete, the same companies that sell in Mexico are in Korea, that is why they cannot be sold at the Tier 1 level (which are the companies that supply components directly to brand assemblers)”, he established.
After the Ministry of Economy announced -last week- that it is seeking with its Korean counterpart to sign a trade agreement as part of the diversification of international markets, the auto parts industry commented that it will analyze whether it is convenient and there are opportunities to carry out exchanges in supply levels 2 and 3.
At the moment, business opportunities are not observed, but it was agreed with the authorities to evaluate the possibility of exchange.
Until the end of 2021, South Korea was placed as the sixth country that increased investments in Mexico in auto parts. It even increased its capital by 100%, going from 65 million dollars to 103 million dollars.
This, as part of the T-MEC requirements for greater regional content, which must be met by automakers that manufacture in Mexico and export to the United States and Canada.
In fact, the automotive companies of Korean origin that settled in Mexico, such as KIA and Hyundai, came with their suppliers to assemble from Pesquería, Nuevo León, so in 2015, a network of 14 Korean suppliers was established in Mexico in support to the Kia plant.
Due to high logistics costs, other Tier 1 and 2 have moved from Korea to Mexico to supply the automaker, while they already operate with different national auto parts suppliers, seeking to promote the growth of the local automotive industry considering prices and quality. thereof.
Recently, the ambassador of the Republic of Korea, Suh Jeong-in, announced that if the trade negotiations for the FTA with Mexico advance, auto parts companies would benefit from entering the country. Meanwhile, Han-kee Yeo, Minister of Commerce of South Korea, highlighted the opportunities that would open up for both nations in the development of supply chains focused on electric and green vehicles.
The director of the INA commented: “In Tier 1, you could not sell Mexico to Korea. The same 600 Tier 1 companies that are in Mexico to produce from defense to defense are the same brands that Korea has.” However, he added that the auto parts sector will analyze if there may be opportunities for negotiation between Tier 2 and 3. “We analyze the opportunity, if it could exist and it exists. We are analyzing so that a response can be given in the coming weeks.”