Overview of the Situation
Following the imposition of a 25% tariff on vehicle imports by the United States in April, more than half of the automotive assembly companies based in Mexico have reduced their shipments to the US market. Despite the tariff only partially affecting vehicles assembled in Mexico, as it provides a discount based on the US components they contain, major brands like Mazda, KIA, Audi, Ford, Honda-Acura, Toyota, and even General Motors have decreased their share of exports to the US.
Key Players and Their Reductions
Out of the 12 automotive groups with assembly and export activities in Mexico, seven have cut their shipments to the US. According to data from Mexico’s National Institute of Statistics and Geography (Inegi), Mazda, KIA, and Audi saw the most significant reductions in their US market share from their Mexican plants between April and June.
- Mazda: Exported 53.4% fewer units to the US, with the American market absorbing 54.9% of its total shipments compared to 72.2% in the same period last year.
- KIA: Reduced shipments by 12.6% to 46,829 vehicles, lowering the US market share in its Mexican exports from 80.7% to 66.4%.
- Audi: Lowered sales to the US by 37.4% to 16,054 cars, which accounted for only 29.1% of total exports, down from a US market share of 41.1% in 2024.
Impact of Tariffs and T-MEC Regulations
Since April 3, the US customs have been charging a 25% tariff on vehicle imports, a measure ordered by President Donald Trump’s administration to protect the automotive sector deemed essential for national security. However, on May 20, Marcelo Ebrard, Mexico’s Secretary of Economy, announced that the average tariff on vehicles assembled in Mexico would be 15% if they complied with the T-MEC rules of origin, acknowledging the high percentage of US components in these vehicles.
On Tuesday, El Economista reported that brands such as Audi, Mazda, BMW, Honda-Acura, and Mercedes Benz, which have recently established plants in Mexico (no more than 11 years old), have reduced their exports following the implementation of tariffs. This coincides with the increased difficulties these companies face in complying with T-MEC rules of origin, which raised the Regional Value Content (VCR) from 62.5% to 75%, up from the previous North American Free Trade Agreement (NAFTA).
Importance of Mexico in the US Auto Market
Of the 16.5 million vehicles sold in the US last year, 16.5% were manufactured in Mexico, making it the primary supplier for the US market, which relies heavily on imports for half of its local demand.
During the reviewed period (April-July), other brands with assembly and export activities in Mexico, such as Ford (93% to 84.9%), Honda-Acura (89.3% to 86.9%), Toyota (93% to 91%), and General Motors (marginally from 85% to 85.4%), also decreased their exposure to the US market.
From April until now, the US market’s participation in Mexican automotive exports has slightly decreased from 77.7% to 76.8%, as sales to the US grew only 0.8% to 905,798 units.
Meanwhile, other significant markets for Mexico have performed better, such as Canada (34.2% increase to 146,262 vehicles), Argentina (+159% to 7,227), Saudi Arabia (+55.5% to 5,775), Japan (+38.9% to 5,412), and Australia (+45.9% to 4,574 units).
Key Questions and Answers
- What is the reason behind the reduction in auto exports from Mexico to the US? The primary cause is a 25% tariff imposed by the US on vehicle imports, which has led major automotive brands to cut their shipments.
- Which companies have been most affected by this tariff? Mazda, KIA, Audi, Ford, Honda-Acura, Toyota, and General Motors have all reduced their exports to the US.
- How has Mexico’s importance in the US auto market changed? Despite the tariff-induced reductions, Mexico remains a crucial supplier for the US market, with other significant markets like Canada and others experiencing growth.
