Mexico

Last modification: 23 Jun 20
Introduction: 

Mexico, officially the United Mexican States, is a federal republic in the southern portion of North America. Andres Manuel Lopez Obador, also known as AMLO, has been the president since December 1, 2018.

Although growth returned quickly in 2010 after the 2008 global financial crisis, ongoing economic and social concerns include low real wages, high underemployment, inequitable income distribution, and few advancement opportunities for the largely indigenous population in the impoverished southern states.


Most of the population is found in the middle of the country between the states of Jalisco and Veracruz; approximately a quarter of the population lives in and around Mexico City

Thank you to contributors to the Mexico WikiFleet page: BDO;TIP Mexico

Chapter 1: Economic and business environment

Demographics

With an estimated population of 127 million (2019)

Capital

Mexico City (8.92 million residents)

Major cities

1. Mexico City (8.92 million residents)
2. Ecatapec (1.66mn)
3. Puebla (1.58mn)
4. Guadalajara (1.5mn)
5. Juárez (1.32mn)

 

Languages

Spanish

GDP

US$1.20 trillion (2019) down 2%
US$9,449 per capita

Mexico has the 15th largest nominal GDP and the 11th largest by purchasing power. The Mexican economy is strongly linked to those of its NAFTA partners, especially the United States.

Unemployment rate

2.9% (March 2020)

Source: Trading Economics

Main industries

Among the country's main industries are food and beverages, tobacco, chemicals, iron and steel, petroleum, mining, textiles, clothing, motor vehicles, consumer durables, and tourism.

Mexico is the 7th largest automotive producer in the world and employs around 1.7 million people. 

Currency

Mexican Peso

Interest rate

5.5% (2Q20)

Source: Trading Economics

Inflation

2.84% (May 2020)

Source: Trading Economics

Chapter 2 : Automotive market, segments & sales

Total Car park

2019

  •  Approximately 33 million passenger cars and another 441,659 passenger pickups, being one passenger vehicle per 3.2 inhabitants. The average age of a car in Mexico is 12 years.
  • An addtional 11.5 million cargo trucks

Source: INEGI 

New vehicle registrations (Cars, LCV, Trucks)

Approximately 1.32 million light vehicles were sold to the public in 2019, down 7.7% from the 1.43 million sold in 2018. (source: INEGI)

In October 2019, the country was on route to selling approximately 24,000 electrified vehicles (mild hybrid, plug-in hybrid, and full electric)

Top 5 brands (total market)

2019 sales
1. Nissan: 268,156 units (-14.1%)
2. General Motors: 211,987 (-10.2%)
3. Volkswagen: 143,649 (-8.5%)
4. Toyota: 105,663 (-2.8%)
5. Kia: 95,539 (+1.4%)

2019 premium market sales
1. BMW: 23,645 units (-5.8%)
2. Mercedes Benz: 20,572 (-11.5%)
3. Audi: 12,309 (-16.7%)
4. Volvo: 2,391 (+23.2%)
5. Land Rover: 1,483 (+5.7%) 

2019 production
1. GM 864,143 units (+3.6%)
2. Nissan 672,700 (-11.8%)
3. FCA 560,141 (-12.3%)
4. Volkswagenn 443,414 (+1.8%)
5. Kia 286,600 (-2.7%)

Model preference top 5 (total market)

2019 sales

1. Nissan Versa 88,707 (-2.9%)
2. Chevrolet Aveo 70,947 (-13.5%)
3. Chevrolet Beat 68,114 (-3.6%) 24,715 hatchback + 43,399 notchback
4. Nissan NP300 62,989 (-6.1%)
5. Volkswagen Vento 47,179 (-14.5%)

source: INEGI


Overall: Passenger Cars 60%  / Light Commercial Vehicles 40%

Dealer network (including fleet dealer network)

Mexico has approximately 3,000 new car dealerships throughout the country. 

Used car market/renewal cycle

Remarketing
Historically, there has been no formal used-vehicle market, auctions of wholesalers in Mexico. At the end of contract, most companies give drivers the option to buy the vehicle, regardless of the kind acquisition. Almost 95% of fleet passeger cars sold to drivers are destined to family members.

Chapter 3: Company car market

Total Fleet Park (company cars)/Fleet penetration in total fleet sales

Considering that corporate fleet vehicles (light passenger vehicles, LCVs, and pickups) are estimated at some 10% of total fleet, there should be around 3 million units in the country. Government and public service vehicles are seen at 1.2 million (source: INEGI). 

Evolution fleet sales (last 5 years)

In 2019, commercial vehicles sales rose 11% to 597,951 units from 538,415 (source: OICA)
2018: 538,415 units
2017: 546,236 units
2016: 581,811 units
2015: 497, 280 units

  • Passenger cars, LCVs and pickups get replaced every 3-4 years on average
  • Lage vehicles such as medium-duty trucks get replaced every 5-6 years on average 

Approximately 30-35% of the vehicles in Mexico are leased (1Q19, Element Fleet Management)

Top 5 fleet brands (fleet market)

Some of the most popular fleet car brands in Mexico inlclude Nissan, Volkswagen, and General Motors.

 

Fleet Model preference top 5 (fleet market)

Among the most sold models in 2019 were Nissan Versa, Frontier and March, as well as Chevrolet Beat and Aveo.

Chapter 4: Taxation & legislation

In 2017, Mexico raised its cap on ethanol in gasoline to 10% (E10) from 5.8%. E10 is allowed in Mexican cities, with the exeption of Monterrey, Guadalahara, and Mexico City. While ethanol producers and providers of fuel additive Methyl tert-butyl ether (MTBE) supported the initiative, some environmentalists are complaining that E10 puts too much burden on the air quality.

 

Mexico

The basis of company car taxation in Mexico is reflected in this overview. Different types of taxes are considered here: taxes related to the registration of the vehicle, income taxes and VAT aspects. Expected future developments are also briefly listed, if any.

1. Car taxation

1.1. Vehicle purchase tax

 

Taxable event


Taxable person

 

Tax rate


Tax due

 

Alienation of cars and definitive import

 

Individuals and/or companies

 

2% to 17% depend of the price of the car

 

Monthly provisional payments due on the 17th of every month

 

1.2. Vehicle and Vessel Tax

 

Taxable event

 

Taxable person

 

Tax due

 

 

 

Taxable period

 

Ownership of a car individual or company

 

Owner of a car may be individual or company

 

State tax that is due the first three months of each year, the rate will vary depending the car price and the state where the plates were issued

 

Yearly

 

2. Income taxes


Mexican income tax rate for companies is 30% is the same rate for the car industry and for individuals it may vary depending of the income amount to a maximum of 35%.

 

3. VAT

3.1. Deduction


VAT rate in Mexico if 16% on the alienations of goods including cars, for companies and individuals which carries out business activities this VAT is creditable.
 

3.2. Leasing

 

Same rate for each leasing payment (16%)

 

4. Company car

4.1. Company car in personal tax returns – benefit in kind

 

Company cars in Mexico can only be deducted in an amount of $175,000 pesos ($9,200 USD aprox) for gasoline cars and in case of electric, natural gas or hybrid cars the amount is $250,000 pesos ($13,160 USD aprox) in a period of 4 years (25% every year)

5. Electric Vehicles

 

* Maximum deduction of $250,000 pesos for income tax purposes

* No new federal car tax

* No ownership tax

 

 

Source: BDO (2018) 

Chapter 5: Car policies

In Mexico, it is very common to have a car as a benefit for job positions such as directors and managers. Nevertheless, fleet vehicles are also used as a company utility, being those for sales people and other operational job positions.
 
Company cars are commonly used for both private and business use, but an investigation will be made if more than the usual kilometers are driven.

There are some companies that have tracking devices to monitor the private use of cars. However, in general, it is not common to charge employees for personal use.
 
When it comes to cars breaking down and dealing with accidents and traffic tickets, each and every company policy differs.
 
One favored policy among some fleet managers is that cars require appropriate preventative maintenance.  If the user does not perform the required preventative maintenance and the vehicle correlatively breaks down, the user is charged for the repair.
 
In the case of an accident, the insurance deductible on the first accident is paid by the company, the deductible on the second accident is split 50/50 between the user and the company, and the third accident would be fully paid by the user. Finally, all traffic tickets must be paid by the user of the car.
 
Keep in mind that there are many variables in full service leasing. The challenge is to tailor make your leasing agreement in accordance with your clients needs.

Among the services appreciated by some customers are replacement cars in the case of an accident or a vehicle breaking down, and special insurance coverage such as those with low deductibles or those which cover even small damages.

Source: TIP Mexico

Chapter 6: Funding methods

 

Overview of penetration of funding methods (buy or lease statement)

Outright purchasing is still the main method of acquision (+/-80%), followed by leasing and credit (+/-20%). Companies opt for outsourcing, either in the shape of open end lease (fleet management) or close end (operational) lease.

Type of suppliers (captive versus multibrand, international versus local…) French lessor ALD Automotive and American lessor Element Fleet Management are the biggest players on the Mexican operating lease market, managing some 25,000 vehicles each. Even though their core business remains full service lease, they were flexible enough to also offer fleet management services adapted to local preferences – and be successful at that. The biggest ‘local’ player, with some 15,000 vehicles, is Ariza, a joint-venture between Corporation Zapata and U.S.-based fleet management company ARI.
6.1 Outright purchase:  
Definition  
Pro’s and con’s  
Economic & legal ownership  
Business practices  
6.2 Renting (Finance lease) :  
Definition  
Pro’s and con’s  
Economic & legal ownership  
Business practices  
6.3 Full service leasing (operational leasing)  
Definition  
Pro’s and con’s  
Economic & legal ownership  
Business practices  
6.4 Fleet Management  
Definition  
Pro’s and con’s  
Economic & legal ownership  
Business practices  
6.5 Short term rental  
Definition  
Pro’s and con’s  
Economic & legal ownership  
Business practices  
6.6 Other funding methods  
   

Chapter 7: Fuel

June 8, 2020
Average gasoline price per liter: US$0.82 (world average is US$0.95)

Average diesel price per liter: US$0.88 (world average is US$0.86)

September 1, 2019
Average electricity price per kWh Households: US$0.08 (world average is US$0.14)
Average electricity price per kWh
Business: US$0.15 (world average is US$0.12)

Source: https://www.globalpetrolprices.com/gasoline_prices/

Fuel type segmentation

Petrol Diesel (not used for PC) EV
91% 8% 1%

Fuel price evolution

The new policy of unsupported fuel prices ends decades of government support and control of fuel prices in Mexico.
On January 1, 2017, Pemex raised the nationwide average price of both grades of gasoline and diesel dramatically by an average of 20%. The price increases varied across Mexico, but universally higher fuel prices impacted all industries in Mexico.

The prices for gasoline and diesel jumped 14-23% across the nation, prompting demonstrations across the country. This is one of the last stages of general opening markets under the ordinances of NAFTA that is designed to benefit American suppliers. But with the falling value of the peso against the dollar and the rising cost of a barrel of oil, Mexico is feeling the impact of free market prices for petroleum products.
Since March 2017, the price of gasoline began changing daily across Mexico to follow the value of the peso and cost of production. *Source: Automotive Fleet

The cost of regular gasoline in 2H17 was approximately US$0.99 per liter (US$3.75/gallon), ranked 16th lowest country in the world. 

Fuel card networks

Cash payments at fuel stations are still common. But the trend for electronic payments (credi cards) is also pushing the fuel card market.
The fuel card market presents two options:

- prepaid fuel cards
- post-paid fuel cards

Leasing and fleet management companies also launched fuel card programs.

Moreover, one of the largest debates in Mexico right now is the battle over whether or not to permit the increasing of ethanol blending in fuel to 10% (E10) from 5.8%. 

The plan, which allows E10 in Mexican cities (with the exeption of Monterrey, Guadalahara, and Mexico City), has been under debate since the country's energy regulatory commission stated last year that it would approve the increase.

While ethanol producers and providers of fuel additive Methyl tert-butyl ether (MTBE) are pushing for the increase, some environmentalists are complaining that E10 would put too much burden on the air quality.

Chapter 8 : TCO components

When it comes to TCO, it really depends on the make and model of the cars being used. To reduce TCO, fleet managers can always suggest a particular model or models to a client but it is really the clients choice in the end.
 
Of course, fuel and energy consumption is a major part of calculating TCO and one key way to monitor energy use, as well as driver habits, is by offering telematics. In Mexico, this type of service is used for reducing vehicle theft as well as fleet sustainability.
 
Source: TIP Mexico

Chapter 9: Safety, insurance and telematics

Safety

Car theft in México cost the insurance sector approximately 1 billion MXN monthly in losses (est. 2018), according to the Association of Mexican Insurance Institutions (AMIS). From April 2016 to March 2019, auto theft increased by 50% in the country. In 2018, 92,000 cars were stolen while the insured vehicle recovery index was only 38%, the lowest rate historically ever recorded in Mexico.

In 2019, the situation improved. From October 2018 to September 2019,  88,047 insured cars were stolen (241 per day), down 6.4% year-over-year, according to AMIS.

From January to September 2019, the most stolen cars models during the nine-month period were:
1. NP 300/Pickup
2.
NissanTsuru
3. NissanVersa
4. NissanAveo
5. Volkswagen Vento

The models most commonly stolen with violent force during the nine months were:
1. Kia Sportage
2. Mazda CX5
3. Volkswagen Vento
4. Kia Río
5. Seat Ibiza

Wednesday was the most common day for a car to get stolen and the victims were people between 36-50 years of age. Approximately 75% were women.

Insurance agencies and fleet operators need to identify effective solutions to mitigate the impact these thefts have on their businesses and customers.

Insurance

Approximately 30% of Mexico's cars are insured. 

Mandatory third-party vehicle insurance has been required since January 2019.  

Telematics
A recent report from C.J. Driscoll & Associates, states that the commercial telematics market in Mexico accounts for over one million units in service. While the market is very fragmented, with no single solution provider accounting for more than a 5% market share, the consumer stolen vehicle recovery (SVR) and telematics market is far more concentrated with a few providers accounting for 2/3 of the units in service.
For-hire and private trucking fleets constitute the largest market for GPS fleet tracking solutions in Mexico.
The telematics market is expanding to governmental fleets, private security fleets, public transit, taxi services, public safety and telecom companies. It is estimated that 30-35% of fleets in Mexico have some sort of GPS device or recovering device in their vehicles (4Q19, Element Fleet Management)

Chapter 10: Environment

Mexico is getting support from various electric vehicle manufacturers. For one, Ford is moving production of its long-range electric crossover from its home state of Michigan to Mexico. To be launched in 2020, this new un-named SUV will be Ford’s first all-electric passenger vehicle.

Moreover, Tesla Motors has scheduled the installation of 18 proprietary EV supercharging stations in the country in 2018, including those in key cities such as Monterrey and Guadalajara. Currently, Mexico has seven stations. It is the only country in Latin America with Tesla distribution.

In July 2019, 2,068 hybrid and electric vehicles were sold, up 66.9% year-over-year. They were composed of 12 electric, 78 plug-in hybrids, and 1.978 hybrids. In the January-July (2019) period, 12,408 of these types of vehicle were sold, up 1.66% compared to the first seven months of 2018. The vast majority of the sales in 2019 were in Mexico City (34.1% of the total), followed by the state of Mexico (18.3%), and Jalisco (8.8%).

Source: INEGI 

Chapter 11: Mobility

Home to numerous new mobility participants as well as innovative business models, Mexico -  in addition to Brazil - is the benchmark of Latin America when it comes to new mobility solutions. Amidst the rise of mobile app-based mobility solutions, among those in Mexico are eHailing companies Uber (USA) and Laudrive (Mexico), as well as car-share company Carrot (Mexico).

According to January 2019 study carried out by financial services evaluator Coru.com and market studies firm Brad.Feebbo, more than half of the residents in the country are keen to ride hailing.

Chapter 12: Key trends to watch