24 Jan 18

Mexico’s uncertainties impacting vehicle sales

Despite having a satisfactory performance in terms of vehicle sales throughout most of last year, Mexico ended up selling approximately 70,000 less cars in 2017 than it sold in 2016, and this is partially due to the growing uncertainties in the country.

Last year, a total of 1.53mn cars sold, being 4.6% less than the record sales of 1.6mn cars sold in 2016, according to the country’s automobile distributors association AMDA. The hardest hit month was December when light-vehicles sales dropped nearly 18% year-over-year.

According to local reports, most of December’s fall was related to premium cars. Land Rover motors posted the largest decrease with sales down 43.1%. It was followed by Jaguar and Lincoln which dropped 39.8% and 33.5%, respectively.

As such, the scenario is not any better for corporate fleets, according to general manager for ALD Automotive Mexico, Thierry Merienne.

"Based on the information available, corporate car sales in 2017 looks to have decreased by approximately 7%," Merienne told Global Fleet, adding however that the demand for car leasing has gone up

The Uncertainties

Besides facing difficulties in controlling inflation which was 5.85% in 2017 compared to 2.82% in 2016, investor confidence has been weakened by the fluctuating value of the Mexican peso, ongoing political uncertainties, and the unclear future of the North American Free Trade Agreement (NAFTA).

While approximately 21 pesos were equivalent to one dollar in January of 2017, the peso strengthened by approximately 24% within six months, before it lost steam and returned to near January numbers in December.  

In terms of politics, 2018 is a presidential election year which could result in a change of strategy for the country.

In addition to the center-right ruling party having no clear front-runner in the face of the falling popularity of President Enrique Peña Nieto, the country’s growing leftist coalition could further weaken the more conservative movement.

Mexican President Enrique Peña Nieto (CREDIT: AFP)

Finally, regarding NAFTA, the drawn out process is still underway with 6th round negotiations taking place from January 23-28.

To qualify for export tariff exemption under the 23-year agreement, the United States government wants 85% of the content of cars made in the region to originate from North America (Canada, the US, or Mexico) and most of it - at least 50% - to come from the U.S.

Today, NAFTA stipulates that 62.5% needs to come from North America.

2018 models

Despite the uncertainties, one way to help recover sales this year is to bring new and interesting vehicles into the market. Among the key models being released this year are the off-road Jeep Wrangler, the Toyota C-HR 2.0, the Infinity QX50 SUV, and the BAIC X55 SUV. 

To push the ever growing move to electrification, BAIC will also be selling its full-electric EV200. Last but not least are the Toyota Prius C (world's best selling hybrid), and the Nissan Leaf 2.0 (world's best selling electric vehicle). 

BAIC EV200 (CREDIT: Youtube)

Authored by: Daniel Bland