United States drivers buying fewer Mexican-made cars

Tue, May 10 2016

Crossovers and pickup trucks are not only growing in market share, they're also more profitable than cars. A crossover on the same platform as a sedan retails for thousands more, despite similar components. It's one of the reasons we've seen automakers rapidly shifting production of their sedans and hatchbacks to Mexico, where cheap labor preserves the thin profit margins on these inexpensive vehicles. But as the market continues to shift in the United States, Mexico is getting burned by its lack of product diversity.

The country's auto exports, which are heavy on cars, suffered a 16-percent drop last month, Automotive News reports. In total, year-over-year exports fell from 233,515 to 197,020 last month, while year-to-date exports are down by 7.4 percent, from 922,029 to 854,118. The number one culprit? America – which usually accounts for 75 percent of Mexico's exports Â– and its appetite for crossovers and pickup trucks bolstered by cheap gas prices.

While Mexico does build some light truck models Â– AN specifically calls out the Ram 2500, Honda HR-V, GMC Sierra, and Toyota Tacoma as export leaders Â– the vast majority of vehicles rolling out of its factories are sedans and hatchbacks. In fact, the three biggest drops in Mexican exports came from companies whose south of the border factories only build cars Â– Ford (Fusion/Lincoln MKZ and Fiesta), Mazda (Mazda3), and Volkswagen (Golf and Jetta).

Mexican Automotive Industry Association President Eduardo Solis told AN the export shortfall will likely be sorted out sooner rather than later, thanks to a pair of new factories Â– a Kia car factory and an Audi SUV plant Â– that are coming online by year's end. The two facilities will add around 100,000 vehicles to the country's export totals, which Solis said should leave the industry on the verge of breaking another export record in 2016.

But how sustainable will these record-breaking years be? Slapping an "Hecho en Mexico" sticker on a new German SUV won't be enough to change the fact that Mexico's product mix is tilted too heavily towards body styles that are not growing in volume. Mexico's record-breaking export years probably aren't at an end, but we'd argue they're certainly under threat.

News Source: Automotive News - sub. req.
Image Credit: Omar Torres / AFP / Getty Images

Plants/Manufacturing
Ford
GMC
Honda
Mazda
RAM
Volkswagen
Truck
Crossover
SUV
Mexico

By Brandon Turkus