WCA September 2015

From the Americas

‘Massive untapped’ Mexican market In 2020, Mexico is expected to build one in four vehicles in a North American industry producing 18.6 million units. The USA will hold its own at two-thirds of the output, or 12.2 million vehicles. Canada will be the big loser, down to 1.6 million vehicles and nine per cent of the output. The quality of the supply base in Mexico has also improved, the WardsAuto industry analyst Haig Stoddard told the Free Press . In a reference to Toyota’s strict standards, he said: “The litmus test was when [the Japanese automaker] said it would build there.” Now, virtually every automaker is adding capacity in Mexico – among them General Motors, Ford, Toyota, Honda, Volkswagen, Audi, BMW, Hyundai and Mazda. In the view of Mr DesRosiers, the Canadian automotive consultant, Mexico is itself a “massive untapped market” that could grow by another one million to two million vehicles a year. Ms Priddle and Mr Snavely of the Free Press are aware that all this manufacturing activity would not mean much if Mexico were not prepared to follow up once the cars roll off the assembly line. But they pointed out that it is. The domestic market continues to grow, and Mexico’s ports and its trade agreements with 45 counties have helped establish it as a strong export hub to Europe and South America as well as the rest of North America.  By contrast, wrote the reporters: “The US has about 20 trade agreements, and Canada also has but a fraction of Mexico’s pacts.” “Mexico bested us on trade agreements,” said Sandra Pupatello, a former Canadian politician who now oversees business development for PwC Canada, in Toronto, as well as the Windsor-Essex Economic Development Corporation. “They quietly have been negotiating trade agreements with the world.” South Korean automakers make ‘astonishing’ strides in latest J D Power initial quality survey “The astonishing thing is the improvement rate of the Koreans. It’s a clear shift in the quality landscape. It’s changing the pace that you need to be at in order to be ahead.” What so impressed Renee Stephens, vice president for United States automotive quality at the market research firm J D Power, was the performance of South Korean automakers in the initial quality study released in mid-June. While the industry overall improved by three per cent in a year, the South Korean companies improved 11 per cent. Japanese brands as a whole improved at a rate of one per cent, while the domestic automakers and European automakers improved by three per cent, Ms Stephens told the New York Times . The initial quality study measures problems experienced by buyers and lessees of new vehicles in the first 90 days of possession. J D Power then ranks brands by the number of problems reported per 100 vehicles. The lower the number of problems, the higher the ranking.

Automotive NAFTA almost 22 years on: united under the trade agreement, the USA, Canada and Mexico are fierce rivals over automotive investment and jobs “Mexico is the auto industry darling. Canada is struggling to retain a manufacturing footprint. And the USA is a house divided, with most of the new automotive investment and jobs headed south of the Mason-Dixon line.” Alisa Priddle and Brent Snavely of the Detroit Free Press did not have to go into the relative fortunes of the parties to the North American Free Trade Agreement (NAFTA) over the years, with Mexico usually odd man out. But a shift has taken place. Right now and for the foreseeable future, the automotive reporters observed, “the farther south you are located, the better.” (“Why Mexico is winning the auto jobs war,” 14 th June) South here refers to both the southern USA and Mexico. “[They] are winning the battle,” the Free Press was told by Dennis DesRosiers, president of the Canadian firm DesRosiers Automotive Consultants. “Over half the capacity and 80-90 per cent of investment dollars are going to the US South or Mexico.” A united trading block under NAFTA – which took effect on 1 st January 1994 – the USA, Canada and Mexico present highly individual characters to auto executives who must decide where to invest in the latest equipment and additional jobs. And these officials have made their preference abundantly clear. Of the vehicles built in North America last year, Mexico produced about one in five, or double the rate from 2004. WardsAuto, which tracks production data, expects that rate to increase to one in four by 2020. Conversely, Mr DesRosiers sees the Canadian auto industry dwindling over the next decade or two, to five automakers with a single assembly plant each — or about half its current manufacturing footprint. According to WardsAuto statistics for 2004, 11.6 million vehicles were built in the USA, or 74 per cent of the 15.8 million NAFTA-zone industry total. Canada built 2.7 million units, accounting for 17 per cent. Mexico contributed only 1.4 million vehicles, or nine per cent. In 2014, signs were strong that the tide had turned. Mexican production had more than doubled to 3.2 million units, or 19 per cent of the 16.9 million industry total. The advance came at the expense of the USA, which dipped to 11.4 million units, or 67 per cent. Canada was down to 2.4 million vehicles, or 14 per cent. Wards sees a continuing trend. It forecasts new plants adding 1.2 million units of capacity in North America by 2020 – but in an uneven distribution.

BigStockPhoto.com Photographer: Aispl

72

Wire & Cable ASIA – September/October 2015

www.read-wca.com