Between January and September of this year, foreign direct investment in the auto parts industry expanded 88.4% to 2,435 million dollars, thanks to the promotion of new projects associated with the fulfillment of the greater regional content, the automobile assembly required by the Mexico-States Treaty. United States, Canada (T-MEC).
The tensions that have arisen between the partner countries due to the differences in the interpretation of the new rule of origin have not slowed down, for now, the arrival of resources to Mexico, which has also benefited from other trade frictions, those of the United States. with China, which have caused the relocation of factories from the Asian country to North America.
Alberto Bustamante, president of the National Auto Parts Industry (INA), emphasize that “our country has established itself as the main supplier of the United States”, by supplying that market with 37% of parts and components required by the manufacture of automobiles in the United States. neighbor to the north.
He argued that the industry is in the process of reactivation, driven by the United States economy, as he pointed out that only one quarter (the third of 2021) was captured an additional 1,167 million dollars, in addition to what was added during the first six months of the 2021 that registered 1,268 million dollars.
“Mexico has started the Asian import substitution phase to strengthen the North American automotive supply chain,” he said.
Despite this, investment capture is below 16.6% of that captured from January to September 2019, when 2,919 million dollars were recorded.
“As long as the US continues to be a large consumer of automobiles and its economy remains, the Mexican automotive industry will remain,” so the expectation is that the US market will sell 15.2 million cars in 2022.
Bustamante stressed that the auto parts industry will close 2021 with production close to 94,000 million dollars, which would represent an increase of 19% more compared to last year, when it faced “the worst moment to date due to the pandemic generated by Covid-19, which will be reflected in a rapid recovery almost reaching the figures of 2019, the year in which we closed with a manufacturing of around 98,000 million dollars, “he said.
80% of what Mexico produces is sent to the United States for the assembly of new cars and another 10% in automobile factories in Mexico that, finally, is exported. In other words, 90% of production goes directly to a vehicle.
The manager stressed that, despite the problems faced by the industry, Mexico remains an important world producer of auto parts, a situation that has allowed it to maintain employment and production levels.
“This is due to the value of regional content in compliance with the rules of origin by the T-MEC, in substitution of imports and the implementation of new technologies (especially electric cars, hybrids),” he said.
Automotive conflict
- The Regional Content Value (VCR) measures the percentage of parts produced in the region that contains a vehicle produced, whether in Mexico, the United States, and Canada and whether or not the VCR agreed in the T-MEC is fulfilled, it depends on that vehicle enjoy the tariff preferences of the treaty.
- The VCR in force in the previous North American Free Trade Agreement (NAFTA) was 62.5% and for the T-MEC it was agreed to gradually raise it to 75% for essential parts, that is, engine, chassis and body, axle , suspension, steering system and battery.
- The T-MEC came into effect on July 1 of last year with a VCR of 66%, which rose to 69% this year. Compliance with the 75% rate will be mandatory as of July 1, 2023.
- Regarding the accounting for the VCR of a vehicle, Mexico and Canada argue that, once an essential part complies with the agreed 75%, it must be considered as totally originating (100%) for the purposes of calculating the VCR of the unit.
- The EU, on the contrary, considers that for the purposes of calculating the VCR of the vehicle, the specific VCR of each essential part should be taken, without the possibility of considering the component as 100% originating.
Reference-www.eleconomista.com.mx