Chinese auto parts companies to strengthen their presence in Mexico

With the ratification of the USMCA, the arrival of new Chinese auto parts firms is expected to fulfill the new rule of origin for the production of vehicles on North America

Chinese auto parts companies to strengthen their presence in Mexico
English 25/01/2020 17:08 Sara Cantera Mexico City Actualizada 17:31

Leer en español

With the ratification of the USMCA, the arrival of new auto parts suppliers is expected to fulfill the new rule of origin for the production of vehicles on North America, mainly manufacturers from China.

The new origin rule increased from 62.5% to 75% of the content of auto spare parts from Canada, the U.S., or Mexico.

The objective is to reduce the number of components that the assemblers incorporate to their vehicles from low-cost countries like China, India, Eastern Europe, or Brazil.

Enrique Dussel, coordinator of the China-Mexico Research Center of the National Autonomous University of Mexico said that, for five years now, Chinese auto parts companies have installed in Mexico, such as Minth, manufacturer of metallic pieces for Nissan, Ford, Honda, Mazda, Audi, Fiat Chrysler, and General Motors (GM).

Did you know Chinese automakers want to expand in Mexico?

With the ratification of the USMCA, “ the origin rules for auto spare parts will increase and, hence, Chinese companies will seek to increase their regional value added,” he said.

Last year two important auto parts firms arrived in Mexico. In Nuevo León, the new Hofusan industrial park opened its doors and the first company to establish there was Hangzhou XZB Tech Co. supplier for Audi, Ford, and GM.

Hangzhou XZB Tech invested USD $9 million and is installed in an area of 3,000 square meters, but it pretends to further expand to 20,000 square meters.

The company will make keys, valve retainers, hydraulic lash adjusters, transmission parts, among others.

Minghua arrived at San Luis Potosí. It manufactures bumpers for BMW’s Serie 3. This company will also invest MXN $633 million in another factory at Puebla to supply Volkswagen and Audi.

Did you know Mexico's automotive industry is among the best in the world?

For its part, the government of Zacatecas announced the construction of an industrial park for Chinese automotive suppliers.

The state government provided the land and the urbanization is in charge of a Chinese company.

In addition, there are meetings with Guangdong Automotive Component, manufacturer of luxury auto spare parts, to establish in the state.

North America’s supply
Arturo Orozco, director of the IPADE Auto Summit, agreed that the USMCA gives uncertainty to the automotive industry and there is the possibility of developing new Chinese suppliers, which will join the assembly factories that export to the United States to increase the content of local auto spare parts.

In addition, he commented that China’s manpower has driven up during the last years and now Mexico is attractive to manufacture components and export them into the U.S. especially after the trade war between both countries.

Did you know the United States-China trade and geopolitical tensions will extend into 2020?

Oscar Albin, president of the National Auto Spare Parts Industry, asserted that there is interest from Chinese auto parts companies to install in Mexico to supply the North American market from here.

However, it is considered that the government has not given enough incentives, as have done other low-cost countries like Taiwan, Thailand, Vietnam, and Malaysia.

According to the China-Mexico Research Center, Mexico is the sixth destination of China’s auto spare parts exports to the world after the U.S., Hong Kong, Japan, Germany, and Singapore.

Therefore, the Mexican government must be more proactive to attract Chinese companies, Dussel concluded.

Have you heard Mexico's automotive industry is threatened by an exports drop?

mp
 

 

Video