Light-vehicle sales, production, and exports all are seeing notable gains in the year to date

Mexico's light-vehicle sales returned a double-digit percentage growth performance in September, according to latest data from the Mexican Automotive Industry Association (Asociación Mexicana de La Industria Automotriz: AMIA). Mexican light-vehicle sales increased 24.9% year on year (y/y) in September, compared with a sales gain at a more sedate pace of 7.9% y/y in August, 16.1% in July, and 27.1% in June. Sales in the year to date (YTD) in September were up an impressive 19.7% y/y to 944,907 units. Year-to-date sales of passenger cars increased 21.7% to 633,354 units and of light commercial vehicles (LCVs) increased 15.8% to 311,553 units. Sales growth so far in 2015 in Mexico has been at somewhat different rates from those seen in the last months of 2014, and different from those in other global regions, in that passenger-car demand increased at a higher pace than LCV demand.

Nissan maintained its position as the best-selling brand in Mexico, with sales of 18,928 units in September, a 17.5% y/y gain, and 246,460 units in the YTD, a 22.3% y/y gain. General Motors (GM) held second place with 20,160 units sold in September, a gain of 34.7% y/y. In the YTD, GM's sales increased 15.4% y/y to 177,777 units. Volkswagen (VW) Group was in third place, with 18,580 units sold in September, up 14.8% y/y, and in the YTD sales rose 11.4% y/y. FCA Mexico, formerly known as Fiat Chrysler Automobiles (FCA), held fourth place, with a 17.3% y/y gain to 8,377 units sold in September. Ford sold 6,704 units in the month, a gain of 34.7% y/y. Toyota delivered 5,617 units, up 25.2% y/y, in September. Honda saw a 20.0% increase in sales to 5,194 units. The results for low-volume brands was mixed in September, with BMW sales (1,011 units) up 22.3%, Subaru up 2.6% (1,110 units), and smart down 89.0% (55 units). While smart is in the process of rolling out a new ForTwo, the brand's sales were down 34.4% y/y in the YTD.

Mexico's auto industry continues to see production gains, though moderated as we begin comparing to months in 2014 in which the new plants were increasing their production. There were 278,781 units built in Mexico in September, a 4.1% gain over September 2014. Only VW reported a decline in production in September; output for that company dropped by 35.2% to 26,773 units, very likely impacted by issues surrounding diesel engines being out of compliance with US EPA regulations. Nissan increased production by 4.2% in September. The gains in Mexico's output continue to be as a result of investment in new facilities, along with Toyota (up 80.0% to 11,101 units) boosting output of the Tacoma.

Mexico's light-vehicle production continues at record levels, with a 7.8% gain in the year to date in September. Nissan continues to lead Mexico in production, with YTD production up 1.5% to 617,034 units. GM's YTD output total of 520,011 was a 0.3% gain. Ford's output was ahead of FCA Mexico's in April, June, August, and September. In the YTD, however, FCA built 373,352 units in Mexico, down at 0.3%, compared with Ford's 331,249 units (down 2.3%). VW's Mexican output declined in April (7.7%), May (15.0%), and again in June (8.1%), though it increased by 3.3% in July and 39.7% in August. In the YTD, VW output was down 0.8% to 350,919 units. Mazda built 13,945 units in September, up 37.4% y/y, and Honda's production reached 19,731 units, against a total of 15,946 units a year before.

Exports in September showed a small decline of 1.7%. In the year to date, exports increased by 6.7% and were at record levels, according to the AMIA. In September, export volume slipped to 78% of the country's light-vehicle output, compared with 82% in the year to date. Exports from Mexico grew 9.1% to 2.64 million units in 2014. Over the first nine months of 2015, 71.4% of exports went to the US, a total of 1,384,590 units. Exports to Canada accounted for 10.9% of Mexico's export volume in the YTD, at 226,861 units. Exports to Brazil declined 36.4% to 51,530 units in the YTD, leaving Germany to become the third-largest export market at 75,771 units. Exports to Argentina increased by 62.4% in the YTD, though more vehicles were exported to Colombia in January−September (40,507 units) than to Argentina (32,146 units). GM and Nissan jockeyed for the position of top exporter; as of September, GM was in the lead at 404,569 units exported compared with Nissan's 392,668 units − together, these two accounted for nearly 58% of exports. FCA Mexico exported 351,663 units and Ford 317,121 units. In the YTD, VW exported 306,024 units, but with the diesel-engined products from Puebla unsaleable until they are revised in compliance with EPA regulations, it is likely that VW's exports will fall at least in the near term, along with production. Mazda exported 122,350 vehicles over the first nine months of 2015, and Honda exported 120,687 units in the YTD.

Outlook and implications

Registrations of light vehicles have returned to pre-crisis levels, which stood at over 1 million units per annum (upa) between 2004 and 2008, largely by improving access to credit, and the market is largely considered business as usual. With double-digit increases many months and a 24.9% y/y gain in September, sales are up 19.7% in the year to date. IHS has revised its forecast for 2015 upwards a second time to 1.307 million units, a 15.2% gain, also indicating the pace of growth over the first six months will slow throughout the year. While August's results, up 7.9%, reflect that expectation, September returned another double-digit gain. We forecast sales in the 1.30–1.42-million-unit range through 2020, increasing to 1.459 million units in 2022. Overall, we expect credit conditions to continue to improve and a moderate pace to ultimately become the trend, beginning with a forecast for 2016 of sales increasing by 3.3%, with growth in subsequent years of 1−2%.

In September, the Banco de Mexico again reduced GDP growth expectations for 2015, to 2.31% (down from 2.34% in August, 2.55% in July, 2.6% in June, 2.66% in May, 2.88% in April, 2.95% in March, and 3.29% earlier in 2015), while now predicting lower inflation (2.75% instead of 2.82%) for 2015 and slightly higher inflation for 2016 (3.46% compared with the August prediction for 3.44%). According to the AMIA, international financial instability, the weakness of the external market and the global economy, and the oil production platform are risk factors that could slow growth. While the figure has not been reported yet for September, in August the fifth component of Mexico's consumer confidence index, which measures intention to purchase durable goods in Mexico, was recorded at 85.8 points. This result was 16.4% higher than in August 2014, but 23.9% below that in August 2007, according to the AMIA. The AMIA also noted that a supplemental index of the possibility of making a car purchase stood at 64.8 points in August, 15% higher than in August 2014.

The AMIA reported that used-car imports are continuing to decline, which is a factor in our sales forecast increase, as the slowdown in 2014 has helped provide some breathing room for new cars. Through August 2015, imports of used cars fell by 68%. In 2014, used car imports fell 29.1% for the year, though this still represented 40% of cars sold last year. The AMIA has previously noted that the 7.5 million used vehicles in the country will have implications on the environment, road safety, and the renewal of vehicles. The AMIA remains concerned that the influx of used vehicles from the US impacts the renewal of the vehicle parc, and encourages the Mexican government to keep the current practices in place.

Investments by automakers and component suppliers continue, with BMW committing to 50% local content and PPG announcing investments in September. In August, Daimler and Renault-Nissan broke ground on construction of their joint-venture plant in early September. After Toyota and GM announced investments, Ford announced investment in engine and transmission production, and Jaguar Land Rover (JLR) is reported to be considering production in the country. Suppliers also continue to expand their facilities in the country.

After increasing 9.9% to 3.21 million units in 2014, we forecast Mexican light-vehicle production growth will be more moderate in 2015, reaching 3.40 million units. However, as new plants come online in 2016 and 2017, output is forecasted to reach 4.48 million units in 2018, continuing and passing 5.0 million units in 2024. Mexico eclipsed Brazilian output in 2014 and is forecasted to remain ahead throughout the forecast period, in part on slowing markets in Brazil and Argentina.