Mexican carmaking enters 2020 with rough outlook as exports drop in a decade

Mexican exports of automotive parts dropped for the first time in ten years last year, as it was pulled down by low demand from outside the United States. Mexican carmaking is about to suffer fresh reversals in the beginning of 2020, suggests an industry group.

Carmaking is a fundamental part in Mexican manufacturing, so a forecast of declining exports in 2020 by the outgoing head of the Mexican automotive industry association AMIA is a tough hit on the Mexican economy.

“It’s not a matter of the plants’ capacity, it’s about how much of this production the market is absorbing,” Eduardo Solis, departing AMIA president said. “We’re seeing major falls at a global level.”

In the previous year, Mexican auto production dropped by 4.1%, to 3,750,841 units, said national statistics agency INEGI. The fall was the second annual in a row, as well as the biggest since the 2009 recession that Mexico endured after the financial crisis.

Mexico has been making efforts to repel recessions ever since President Andres Manuel Lopez Obrador pledged to heighten economic growth since he took office in 2018. The huge demand from United States has helped in alleviating a bigger slowdown.

Leftist Lopez Obrador’s economic decisions have left investors uneasy, as international trade roiled due to Donald Trump’s pursuit of commercial disputes.

The negotiations over a new regional trade deal between Mexico and US lawmakers has caused uncertainty about accessing Mexico’s main foreign marketplace in 2019.

Mexico’s auto exports dropped 3.4%, to 3,333,586 units last year, INEGI said.

AMIA data for 2019 through November show that despite the 5% growth in auto exports to the US over that 11-month period, shipments to Canada dropped 12.5%, to Europe 20.1%, and to Latin America 28.6%.

Solis forecasts that in 2020, Mexican exports would fall about 80% of the estimated 3.5 million drop in auto production, covering 2.8 million units.

Mexico’s auto output tumbled by 12.7% while exports slid by 16.7% when compared to the same month of last year.

The data will add to market fear of Mexican gross domestic product suffering its first contraction in 2019 after ten years, once official figures are published.