Mexico’s $26 billion auto boom is sagging

Mexico is particularly vulnerable because many of its factories make small cars.
Mexico is particularly vulnerable because many of its factories make small cars.

Bloomberg

The great Mexican auto boom, fueled by an almost $26 billion investment rush from foreign carmakers, is cooling off — and weakening a pillar of Latin America’s second-largest economy.

Auto production has fallen four straight months, the longest streak since 2009, led by drops at Fiat Chrysler Automobiles, Mazda Motor Corp. and Volkswagen. Export-oriented factories are selling fewer vehicles overseas as shipments to the U.S. stagnate and sales to the rest of the world tumble.

Cheaper gasoline prices have undercut demand for the small cars Mexico specializes in, especially in the U.S., its main foreign market. That’s slowing down the nation’s marquee manufacturing industry since Mexico exports about four out of every five vehicles it makes. The decline also marks at least a temporary hiatus in Mexico’s automotive ascent after a 50 percent jump in vehicle output in the five years through 2015.

“It’s a yellow alert for the Mexican economy because auto exports represent about a quarter of total exports,” said Carlos Capistran, the chief Mexico economist at Bank of America Corp. That’s one reason he’s forecasting an economic expansion of 2.3 percent this year, lower than the 2.5 percent median of 26 analyst estimates compiled by Bloomberg.

“The fall is due to lessened demand in the U.S. and Canadian markets, where we export half of our production,” Mazda spokesman David Hernandez said in an emailed response to questions. “We have a flexible production system that allows us to adapt to the market’s ups and downs with relative ease.”

http://www.detroitnews.com/story/business/autos/2016/06/14/mexico-auto-sales/85895388/

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