USMCA and electrification: How carmakers adapt production in Mexico to the new requirements.

Keywords:

Abstract:

Here we analyze how automakers in Mexico adapt to the USMCA's new rules of origin and increased electrification. The new agreement increased the regional content requirements and the procedures and information that motor vehicle manufacturers must provide for their products to be considered originating. Specifically, the regional value content (RVC) requirement on passenger vehicles and light trucks, increased from 62.5% in NAFTA to 75% in USMCA. The agreement established that OEMs should comply with new rules under alternative transition regimens within three years. This could be extended to five years or longer depending on the company's strategies in the market. This work gives particular attention to changes in passenger vehicles and light trucks production. We analyzed the regional value content (RVC) reported for each model assembled in Mexico and sold in the USA in the last three years. And the product strategy by examining the Automotive "pipeline" reports, each company's annual reports, and the intraregional exports. Since governments assumed that the agreement would favor part-import substitutions, we also used a trade database to analyze changes in imports of the groups of regulated auto parts.
We found that companies comply heterogeneously with the new rules of origin. Since GM, Ford, and Stellantis (FCA) have their roots in the United States, their supply base is important in the North American region, which favored them to comply with the USMCA rules of origin since before the treaty was signed. On the other hand, German and Asian automaker's models did not comply with the VCR. Within the product strategy, some vehicles will be finished, freshened with significant engineering, design, or technology updates, or redesigned and undergo extensive changes but retain the model name or plate.