Renegotiation of NAFTA and its effect on the Mexican auto-parts industry

Abstract

Since 1994, the Mexican auto parts industry has strongly developed due to an increase in motor vehicle production, local sales, exports volume and tariff benefits related to the North American Free Trade Agreement (NAFTA). Nowadays, Mexico is the seventh largest automotive manufacturer and the third largest light-vehicle exporter. This study objective was to analyze the effects of recent NAFTA renegotiation on the Mexican automotive sector, specifically regarding auto parts industry Regional Value Content (RVC). Data collection was carried out by literature review and application of a semi-structured interview to experts in governmental, industrial, academic and business sector. The impact on the regional supply chain of Mexican auto parts industry was evaluated from 4 different perspectives: business, industry, government and academic. Results predict a possible restructuration of the supply chain to comply with the new RVC percentage, identifying three strategies for the Mexican industry: direct foreign investment increase, development of auto parts local suppliers and internationalization of these companies.