Mexico carmaking faces rough 2020 as exports post first drop in decade

MEXICO CITY (Reuters) - Automotive exports from Mexico fell for the first time in a decade last year, dragged down by weak demand from outside the United States, and Mexican carmaking is likely to suffer fresh reversals in 2020, an industry group said on Wednesday.

FILE PHOTO: A carrier trailer transports Toyota cars for delivery while queuing at the border customs control to cross into the U.S., at the Otay border crossing in Tijuana, Mexico May 31, 2019. REUTERS/Jorge Duenes

Carmaking is a pillar of Mexican manufacturing, and a forecast by the outgoing head of Mexican automotive industry association AMIA that output and exports would decline again in 2020 does not augur well for Mexico’s stagnant economy.

“It’s not a matter of the plants’ capacity, it’s about how much of this production the market is absorbing,” departing AMIA president Eduardo Solis told a news conference. “We’re seeing major falls at a global level.”

Last year, Mexico’s auto production slipped by 4.1% to 3,750,841 units, national statistics agency INEGI said. It was the second annual decline in a row, and the biggest since the recession Mexico suffered in 2009 after the financial crisis.

Mexico has been struggling to stave off recession ever since President Andres Manuel Lopez Obrador took office in December 2018 pledging to increase economic growth. Only robust demand from the United States has prevented a bigger slowdown.

The leftist Lopez Obrador’s economic decisions have unsettled some investors, while commercial disputes pursued by U.S. President Donald Trump have roiled international trade.

Drawn-out and at times testy negotiations between Mexico and U.S. lawmakers over a new regional trade deal, the United States-Mexico-Canada Agreement, also fed uncertainty about Mexican access to its principal foreign marketplace in 2019.

Mexican auto exports fell by 3.4% to 3,333,586 units last year, INEGI said, the first annual decline since 2009.

AMIA data for the year through November show that while auto exports to the United States grew by nearly 5 percent over that 11-month period, shipments were down to Canada by 12.5%, to Latin America by 28.6% and to Europe by 20.1%.

Solis at AMIA forecast that in 2020, Mexican production would fall to about 3.5 million autos and that exports would be around 80 percent of that figure, or about 2.8 million units.

Mexico’s auto industry ended the year with a whimper, with auto output tumbling in December by 12.7% and exports by 16.7 compared to the same month a year earlier.

Meanwhile, a monthly gauge of Mexican industry showed that activity in the manufacturing sector suffered its biggest contraction since at least April 2011.

The weak data will add to fears that Mexican gross domestic product may have suffered its first contraction in a decade in 2019 when official figures are published in coming weeks.

Reporting by Anthony Esposito and Sharay Angulo; Writing by Dave Graham; Editing by Chizu Nomiyama and Grant McCool