Brazil is bound to be surpassed by Mexico as the top auto producer in Latin America this year. In fact, Mexico has already overtaken Brazil in the first five months of the year, and is expected to hold its ground through 2014, according to IHS Automotive. Mexico’s fast rise to the top is being boosted partly by a boom in auto sales in the United States, which is its largest market.
In contrast, cooling local demand has led to a slump in Brazilian production in the first five months of 2014. Auto production in Mexico jumped 7.2 percent in the January-May period to 1.31 million vehicles, thanks to new sites for Nissan Motor Corp., Honda Motor Co. and Mazda Motor Corp., according to the Mexican Automobile Industry Association (AMIA).
"The wind is in our sails" in Mexico, remarked Luis Lozano, lead automotive partner at PricewaterhouseCoopers in Mexico City. He quipped that the auto industry will continue as the icon of the country, despite talks on the rise of energy and telecom industries.
Once it cements its position as the top auto producer in Latin America, Mexico becomes the seventh largest auto producer in the world, which is currently being dominated by China and the United States.
The rise of Mexico to the top and the slide of Brazil highlight the state of their biggest markets. Cars and trucks built in Brazil are considered too expensive to be exported, no thanks to high labor costs and taxes, and are usually sold locally.
On the other hand, eight of 10 vehicles produced in Mexico are exported, half of which are shipped to the US. The rise of Mexico to the top and the slide of Brazil highlight the underlying economic fundamentals in the two countries.
While Mexico is beginning to experience recovery after missed quarterly growth forecasts, Brazil is trimming gross domestic product estimates for 2014 and 2015 and hiked inflation forecasts. Economists expect the Mexican and Brazilian economies to surge 2.8 percent and 1.3 percent, respectively. [source: Bloomberg]