Low Cost Cars Under Average Price
The historical development of the domestic auto industry dates from the decree of 1963 which aimed to develop this industry in Mexico. The decree required a minimum of 60% of domestic manufacture, so that companies wanting to sell their products in Mexico, would be manufactured in the country, at least 60% of the total price of the units. The companies that benefited from the decree were: General Motors (GM), Ford, Chrysler, Volkswagen, Nissan and Renault.
This involved making within the country, basic-ly, the powertrain of the car-engine, gearbox, front and rear axles, mechanical components “, assembly, garments and interior finishes, so that only mattered in the body parts to be welded into Mexico. And so was born the manufacture of engines in the national territory, which includes casting, machining and assembly for domestic consumption and for export, so that now the auto parts industry billed 26.121 million dollars, a figure very similar to the production car terminal .
Before opening, the regulations have changed to the point that, today, requires a minimum investment of $ 100 million in construction in order to sell cars in Mexico. This situation favors large global companies seeking to participate in the Mexican market without making large investments in the country, unlike those who stuck to the decree of the automotive industry in 1963. The new entrants come by
the domestic market with minimal investment and not so much by the benefits of manufacturing.
Total production in Mexico during 2006 was 2,000,000 units, of which 1.59 million were exported and 420.000 were sold here, leaving a favorable balance for the country. This is due to the comparative and competitive advantages of Mexico that have managed to make good use of transnational corporations.
However, it is noteworthy that in the same period were imported 710.000 units have a significant impact on our trade balance. These imports should be linked to production on future investments in the country.
“ECONOMIC LUXURY O?
In the market for popular cars are a big void, because consumers are migrating subcompact compact sector, given the low price difference, and it detects the need for economy cars in the order of $ 5,000 down. These can only be produced in low cost countries, so Mexican law should privilege and develop this sector, as our natural market is Mexico and the rest of Latin America (especially those countries that lack the economies of scale necessary).
Chrysler de Mexico has announced the import of Chinese cars Chery brand for 2009 (El Universal, August 11, 2007). The company has said it would use a business model similar to that of Hyundai, which under the umbrella of Dodge (such as Atos) has a strong presence in the domestic market. This model, which focuses on marketing and not production, not create jobs in Mexico.
In the long term, the country would produce compact cars for their own consumption and only would manufacture luxury units as is happening with most of the companies important automotive located in national territory (Lincoln, Hermosillo, Son.; SUV’s Cadillac in Silao , Gto.). On the other hand, the growth of domestic consumption in China pu-would potentially affect the supply of compact car for Latin America, where Brazil is currently the leader with a lower quality than the Mexican.
We believe that legislation should be focused-giving to promote economic auto production in Mexico, as in the time it was the original decree of the automotive industry, taking into account the new circumstances. Luxury units will be manufactured in any case in the country for the quality of our workforce.
The consolidation of large economic blocs (Asia, Europe and America) will generate non-tariff barriers including tariff and exchange rate.
By 2012, according to Global Insights, will produce more than 80 million cars, the total emerging countries will be producing 47%, ie 10% more than today. Emerging markets represent 89% of growth; nations like China and India are large producers of small cars, mainly for its own market.
There is a great opportunity for national automotive legislation takes into account these changes to strengthen the manufacturing sector popular car in Mexico.
CONSOLIDATING THE ADVANTAGE
While the global automotive industry will grow at an average annual rate of 3% over the next six years, this growth is in emerging countries, for this reason it is important to strengthen the capacity of our country in the field of popular cars in the coming years if we keep a significant share in the markets of our region.
In the global automotive industry is taking a new configuration in the light of new competitors and new markets in the sector. Basically, the entry of India and China, with its own designs and with growth of double-digit domestic market, and Brazil, Mexico and Russia partners with major industry leaders with the ability to supply domestic demand and regional markets, which demand products different.
Recently, President Felipe Calderon stated that Mexico has decided to make the “new country the car”, the best investment destination in the world for the automotive industry. This, at the opening ceremony for the building of a new Chrysler plant in Saltillo, Coahuila., With an investment of 550 million dollars, according to company information.
In the case of Mexico, is seen as a favorable environment priorities are cen-tered in: Security, tourism, infrastructure and job creation.
The number of cars sold in the country in 2005, has been 1.132 million new cars, according to the Mexican Association of Automotive Industry (AMIA), of which 60% are compact and subcompact. However, the report said, sales of subcompacts, and September 2006, has fallen 12.3% and 7.8% minivan, the above due to consumer preference for SUVs and Crossover.
The cheaper cars are the Chevy, Atos, Matiz, Ford Ka and Pointer, with prices ranging between 78,000 and 110,000 pesos per unit. This leaves a gap in the market for which China and India are developing a product. India being very aggressive to set a price target of $ 2,500.
In Mexico, this is a neglected, in part, satisfied with the importation of used cars, since they have an average cost less than $ 2,000. According to Melgar and Associates vehicle fleet of cars illegal in our country, amounted to 4, 476.000 from 1972 to 2006, which have been regularized in the same period, 990.867 units.
It also reveals an important opportunity in cars with public money of about 50,000 pesos, in cash transactions on credit, since there is no offer on the popular sector, this being a forgotten segment of big business.
The major threat in low-income sectors is fully open the market of used cars from the United States (U.S.) from 2009, with the side effects that this implies in terms of job creation, pollution, taxes and others.
To counter these effects, the country’s industrial policy must be adequate to promote the growth of popular car sector, through manufacturing technologies low-cost, labor-intensive along the production chain and logistics, creating value for the country.
