Last week, Plastimagen Mexico 2016 was held in Mexico city since March 8th to March 10th. This is considered as #1 event for the plastics industry in Latin America. Then it is also a good time to review the plastics industry, especially in the automotive sector, in Mexico. 

Currently, this Latin American country imports about 70% of the components for its auto assembly plants from Tier 2 and Tier 3 suppliers since Mexico still lacks enough local manufacturing capacity and expertise. Particularly, the injection molded plastic component account for $6.4 billion among those 70%. 

Then that’s a significant opportunity for U.S. and Canadian plastics processing firms. But will it last? There’s a lot of pressure to localize more component production in Mexico, both from car makers and the Mexican government.

Mexico’s light vehicle production is expected to keep growing, to 5 million vehicles a year in 2020, according to the Mexican association AMIA. Deloitte Touche Tohmastsu Ltd. estimates Mexico will be the world’s fifth-largest auto producer by 2020, up from what AMIA said was the seventh largest in 2014.

It’s easy to see why Mexico’s car industry has grown, with wages of Mexican auto workers, in Deloitte’s words, “barely 20 percent” of those in the United States. “So it should not be surprising that the share of Mexican-produced vehicles entering the U.S. market has grown significantly,” Deloitte said in a May 2015 report on Mexico’s development.

If Mexico combines growth to 5 million light vehicles a year with more localization of components, U.S. and Canadian plastics processors will face more pressure to put more production in Mexico.

Mexico’s car industry is very much a supply base for the United States and Canada. While its exports to other parts of the world are increasing because Mexico has trade pacts with many countries around the world, about 75 percent of Mexico's car production is still exported within NAFTA.

That’s very different than, for example, China, where the auto manufacturing industry is very focused on the domestic market. Mexico at the moment lacks a big domestic market for new cars. There’s a similar trend in auto parts. Since 2001, Mexico has overtaken Canada to become the biggest foreign supplier of U.S. motor vehicle parts, according to the U.S. Federal Reserve. So the changing picture of the North American auto industry supply chain is one reason why the attention of the North American plastics industry will be focused this week in Mexico City.

It is clear that Mexico’s industry is developing, and seems certain to play a larger role in NAFTA’s plastics industry.

(According to Plastics News)