Mexico's auto industry continues to see production gains.

Mexico's light-vehicle sales returned a double-digit percentage growth performance again in December, at 20.6% year on year (y/y), compared with 13.0% y/y in November 2015, according to latest data from the Mexican Automotive Industry Association (Asociación Mexicana de La Industria Automotriz: AMIA). For the full-year 2015, sales reached 1.351 million units, up from the IHS Automotive forecast. In 2015, sales of passenger cars increased 19.7% to 892,194 units and sales of light commercial vehicles (LCVs) increased 17.8% to 459,454 units. Sales growth in 2015 in Mexico has been different from 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 38,582 units in December, a 10.4% y/y gain, and 347,124 units in the year to date (YTD), a 19.0% y/y gain. General Motors (GM) held second place with 33,157 units sold, a gain of 35.7% y/y. For the year, GM's sales increased 18.1% y/y to 256,150 units. Volkswagen (VW) Group was in third place, with 22,044 units sold in December, up 16.0% y/y, and in the YTD its sales rose 11.9% y/y. FCA Mexico held fourth place with a 10.7% y/y gain to 10,730 units sold in December. Ford sold 11,224 units in the month, a gain of 19.5% y/y, but was unable to get ahead of Toyota, which delivered 12,226 units, up 19.5% y/y. Honda saw a 10.4% increase in sales to 5,439 units in December. The result for low-volume brands was mixed in December, with BMW sales (1,138 units) up 8.%, Subaru up 41.2% (185 units), and smart down 98.6%. While smart is in the process of rolling out a new ForTwo, the brand's sales were down 50.0% y/y in the YTD.

Mexico's auto industry continues to see production gains, though moderated as we begin comparing figures with months in 2014 in which the new plants were increasing their production. There were 222,942 units built in Mexico in December, a gain of 6.9% compared with December 2014. VW's production is down on the YTD metric (down 3.7%), along with Ford's (down 2.0%). The gains in Mexico's output continue to be as a result of investment in new facilities, with Toyota continuing to see gains on increased Tacoma production.

Mexican exports in December gained 5.9% y/y. In the YTD, exports increased by 4.4%, according to the AMIA. In December, export volume was 94% of the country's light-vehicle output, compared with 81.2% in the YTD. Exports from Mexico grew 9.1% to 2.64 million units in 2014. In 2015, 72.2% of exports went to the United States, a total of 1,993,162 units. Exports to Canada accounted for 10.1% of Mexico's export volume in 2015, at 290,371 units. Exports to Brazil declined 42.2% to 59,428 units in 2015, leaving Germany as the third-largest export market at 94,088 units. Exports to Argentina increased by 53.2% over the year, though more vehicles were exported to Colombia in 2015 (54,115 units) than to Argentina (39,391 units). GM exported more vehicles from Mexico (553,502 units), staying ahead of Nissan's exports of 538,972 units.

Outlook and implications

Registrations of light vehicles have returned to pre-crisis levels in Mexico, which stood at over 1 million units per annum (upa) between 2004 and 2008, largely by improving access to credit and improved consumer confidence, and the market is largely now considered business as usual. With double-digit rate increases in many months of 2015, sales were up 19.0% in the year to date in December. IHS forecasts credit conditions to continue to improve and a moderate pace of sales growth to ultimately become the trend, beginning with a forecast for 2016 of an increase of 5.1% and growth in subsequent years of 1−2%.

After revising GDP expectations downward for several months, the Banco de Mexico increased its expectations in December to 2.45% for 2015. This compares with October's 2.29%, markedly below 3.29% at the beginning of the year, and the bank now predicts lower inflation (2.24% instead of 2.75%) for 2015 and 3.32% in 2016. According to the AMIA, the weakness of the external market and the global economy, international financial instability, and the oil production platform are risk factors that could slow growth. In December, the fifth component of Mexico's consumer confidence index, which measures intentions to purchase durable goods in Mexico, was recorded at 87.4 points. This result was 0.3% higher than in December 2014, but 24.3% below that in November 2007, according to the AMIA. The AMIA also noted that a supplemental index of the possibility of making a car purchase stood at 68.3 points in December, 11.6% lower than December 2014.

The AMIA reported that used-car imports are continuing to decline, which is a factor in our sales forecast increase, and the slowdown of imported used cars in 2014 has helped provide some room for new-car sales. Through November 2015, imports of used cars fell by 64.5%. 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.

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 3.37 million units, a growth rate of 4.9%. However, as new plants come online in 2016 and 2017, output is forecasted to reach 4.53 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.