Mexico's light-vehicle sales surged 18.1% year on year (y/y) in September, continuing the trend of previous months in 2016. Exports and production increased in September, but in the year to date exports were down 1.5% y/y, while production was slightly up y/y.
IHS Markit Perspective
- Significance: Mexico's light-vehicle market continues to post strong gains thanks to favourable macroeconomic conditions. Sales grew 18.1% year on year (y/y) in September and 18.4% y/y in the year to date (YTD). Record exports (up 8.8% y/y) and production (up 2.4% y/y) in September improved the YTD figures. Sales crossed the million-unit mark in September, two months earlier than in 2015.
- Implications: Local demand and a bump in September's exports contributed to increased production. A YTD export decline was largely the result of the struggling markets of South America, which have continued to shrink throughout the year. The strongest export market for Mexico remains the United States, followed by Canada.
- Outlook: IHS Automotive earlier adjusted its forecast for 2016 on the strong first-quarter results, and another adjustment has been made in the September forecast. We are now projecting Mexico's light-vehicle sales will grow 15.3%and reach 1.559 million units in 2016. Continuing investment in production facilities will help Mexican output grow steadily over the coming years, despite the headwinds faced from the shrinking South American export markets.
Mexico's light-vehicle sales have surged at double-digit percentage rates over the first nine months of 2016. In September, light-vehicle sales grew 19.6% year on year (y/y) to 131,443 units, according to latest data from the Mexican Automotive Industry Association (Asociación Mexicana de La Industria Automotriz: AMIA). In January−September, sales increased 18.4% y/y to 1,119,106 units. By comparison, sales did not break the million-unit mark in 2015 until November. The market grew 19.1% in 2015, reaching sales of 1.35 million units, split between passenger cars, up 19.7% y/y to 892,194 units, and light commercial vehicles (LCVs), up 17.8% y/y to 459,454 units. Sales growth in Mexico is different from the trends in other global regions, in that passenger-car demand has accounted for about 85% of sales, while LCV demand has accounted for 15%. IHS Automotive earlier increased its forecast to sales growth of 11.6% in 2016, up from a previous forecast of a gain of 8.1%. With the September 2016 forecast, we now expect a full-year sales total of 1.559 million units.
Nissan (including luxury brand Infiniti) maintained its position as the best-selling auto group in Mexico in September, with Nissan sales up 15.1% y/y to 21,151 units and Infiniti sales up 14.3% y/y to 84 units. Volkswagen (VW) was again in second position for the month, although GM remains in second position in the year-to-date (YTD) figure. In September, the VW Group (Audi, Porsche, Seat, and VW) sold 19,101 units in Mexico, a gain of 9.7%, while General Motors (GM), under the Chevrolet badge, sold 17,176 units, a 18.7% gain. Ford was in fourth place, with the Ford brand selling 5,084 units, up 33.1%, and the Lincoln brand selling 30 units, down 2.5%. Toyota's sales of 4,421 units, up 16.0% y/y, were enough to keep the automaker ahead of Fiat Chrysler Automobiles (FCA), which sold 3,939 units, up 2.4%.
Mexico's light-vehicle production gained 2.4% y/y to 285,344 units in September, up from 278,781 units in September 2015. In the YTD, production was about even, increasing 0.9% y/y to 2,576,481 units. Nissan easily remains the most significant contributor to Mexico's production, although the automaker's output declined 6.7% y/y in September, but was up 3.3% y/y to 637,171 units in the YTD. In second place, GM's output was down 1.5% y/y to 511,985 units in January−September. Ford's output was down 5.0% y/y to 314,633 units in the YTD, while FCA's production slumped 9.7% y/y to 337,042 units. Mazda's production was down 22.5% y/y to 112,060 units in the YTD, while VW's production dropped 12.9% y/y to 305,522 units. Toyota's output increased by 41.2% in the YTD, while Honda's production was up 36.6%.
Mexican light-vehicle exports were down 1.5% y/y in January−September, assisted by an increase in September of 8.8% y/y. In September, declines in exports were reported by Mazda, Nissan, and VW plants, and in the YTD, FCA, Ford, GM, and Mazda saw exports decline. GM exports were down 4.1% y/y to 387,880 units in January−September, while VW shipped only 246,464 cars, down 19.5%. Brazil's economic woes continue to act as a drag on Mexico's total export numbers, despite strong demand from the United States; over the first nine months of 2016, Mexico exported 19,046 fewer units to Brazil than in the same period of 2015.
Outlook and implications
The Mexican light-vehicle market has returned to pre-crisis levels, which stood at sales of over 1 million units per annum (upa) during 2004−08, largely on increased access to credit and improved consumer confidence, and the market is largely considered business as usual. With double-digit rates of increase in many months, sales increased 19.1% in 2015 and have been strong throughout 2016, with a strong 18.4% increase over the first nine months, driven by solid gains each month. September was no exception to this strength, as sales climbed 18.1% y/y and represented a record performance for the month. IHS Automotive forecasts that conditions will continue to improve. While more moderate growth will become the trend, our forecast for 2016 has been increased to a gain of 15.3% to 1.559 million units, followed by growth through 2021 of between 1.6% and 6.8%. Mexico's light-vehicle production increased again in September, bringing the YTD figure into positive growth territory; exports in the YTD showed softness, falling 1.5% y/y, despite September's strong results.
The AMIA notes that the Banco de Mexico, the central bank, in September indicated an expectation of economic growth of 2.13% for 2016 and 2.36% for 2017, compared with earlier projections of 2.69% in 2016 and 3.18% in 2017. Inflation is now expected at 3.18% in 2016 and 3.45% in 2017, revised from 3.30% in 2016 and 3.41% in 2017 forecasted earlier in 2016. According to the AMIA, the Mexican economy continues to see the same possible headwinds: weakness of the external market and the global economy, the platform of oil and the export price of oil. As Mexico's fortunes tend to mirror those of its neighbour, the US, the 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 likelihood of purchases of durable goods, increased by 1.6% y/y, at 84.0 points; this was 21.6% below the level of April 2007, prior to the recession. A supplemental index of the possibility of buying a car increased to 66.1 points in April, 4.4% higher than in April 2015 − these figures have not been reported since.
The AMIA reported that used-car imports continue to remain low, which is a factor in our sales forecast. The slowdown of imported used cars in 2014 and 2015 helped provide some breathing room 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, used car imports gained by 17.1%, to 61,587 units, followed by y/y declines during May−August. In January−August, 106,923 used vehicles were imported, 5.8% lower than the 113,552 used cars imported over the first eight months of 2015. This change is helping to maintain the negative pressures on the domestic market. The association continues to note that more than 7.75 million used vehicles in the country will have implications on 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 encourages the Mexican government to keep the current practices in place.
Investments by automakers and component suppliers continue in Mexico, and September closed with the formal inauguration of the all-new Audi plant, while Toyota increased output from its pick-up plant and Kia opened a plant. Earlier recent actions include new facilities from Brose and 3M. In July, Michelin confirmed investment in a new plant, Inteva started construction work on a plant, ThyssenKrupp confirmed its Mexican investment was on track, and BMW broke ground on a new plant. In April, Ford announced a new USD1.6-billion small car plant. Production began at Kia's plant in May and Audi is on schedule for a September production start. GM has also started supplemental production of the Cruze in Mexico. 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 4.44 million units in 2018, passing 5.0 million units in 2024. Mexico's light-vehicle production eclipsed Brazil's 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.