How used cars are hindering Mexico's potential
Since January, Mexico has been able to import American and Canadian vehicles that are Model Year (MY) 2007 or older. Up until December, the limit was MY04 or older and in 2009, it was MY99 or older. In 2019, any used vehicle can be imported from the U.S. and Canada, regardless of its age. This is not a new problem: in 2006 and 2007, Mexico imported more used vehicles then it sold new cars.
Although the imports cooled down last year, they gained strength again earlier in 2013. There was an average increase of 44.3% during Q1 2013 compared to Q1 2012, with a peak of 64.5% in January.
The main problem of imported used vehicles is that they make Mexican used vehicles cheaper. So when Mexican customers go to the dealer network willing to use their car as a down payment, they have to face higher monthly payments. Or, maybe even worse, save more money because only about 50% of new vehicles sales in Mexico are financed. As a comparison, 61% of new light vehicles are financed in Brazil.
With several free trade agreements, Mexico has become an important export hub. Last year, the U.S. bought 52.1% of all light vehicles produced in Mexico. Adding Europe, Brazil and Argentina to the math, 67.9% of Mexico's production was exported last year. Mexico is exporting nice, newer vehicles while importing older ones.
Polk's new light vehicle forecast for Mexico this year is a little over 1 million units, which has not happened since 2008. Highly dependent on the American economy, Mexico saw its market slump 26.3% in 2009 and has slowly recovered. Perhaps without the competition of imported used cars, the 1 million mark could already have been reached again.
Augusto Amorim is senior analyst, South American light vehicle production forecast, IHS Automotive
Posted 10 May 2013
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