The new rule of origin for the automotive sector required by the Treaty between Mexico, the United States and Canada (T-MEC) it would imply extra costs for the automakers and auto parts companiessaid Guido Vildozo, senior manager of light car sales for Latin America at IHS Markit. Read: Economic activity falls in 18 states
The new trade agreement states that cars produced in North America must contain at least 75 percent of content that has been produced in the region. In the previous agreement, the required percentage was 62.5.
The automotive landscape is not encouraging. Photo: AGENCIA REFORMA.
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“We have a reason why we are trying to take advantage of a global economy. We believe that by being able to pass that cost of production equipment when we go towards 75 percent of regional content, vehicles will rise, on average by 4 or 7 percent.. “
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“Automotive companies will probably only send one percent to the consumer, so the industry, between the terminals (automakers) and the auto parts companies, will have to absorb the balance of that difference in costs,” Vildozo explained in a webinar organized by from the Anahuac Business Development Institute (IDEA) and IHS Markit.
In addition to the constant falls in sales that have been registered in the automotive sector in Mexico, the closure of the plants, derived from the coronavirus, could bring a decrease in inventories and contribute to the decrease in sales.
If we don’t start or resume production until the first week of June, we could have insufficient inventory by the second or third week of June, “said Vildozo.
For the closing of 2020, it is expected that the sales of cars in the Country will be of 990 million units, a downward forecast regarding the million 300 thousand units that were placed in 2019, that is, will decrease 24 percent, according to information from IHS Makit.
While it is estimated that 26.6 percent fall in the United States at the end of this year and 15.5 percent in China.
Given the looming crisis, an earlier recovery for the United States would be positive for the automotive industry in Mexico, Vildozo said.
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For Rafael Amiel, director of economy for Latin America and the Caribbean at IHS Markit, due to the closeness of Mexico’s economy to that of the United States, the country’s economy could take a recovery if the neighbor to the north also does so.
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