Industrial Policy and Regional Development of Automotive Industry in Mexico

Résumé:

Research question.
The automotive industry in Mexico faces several relevant threats, mainly from the substitution of NAFTA by the new treaty USMCA, the disruption of global chains after the COVID-19 pandemics, and the change towards electrification and its impact on parts suppliers and labour. In this context, the OEMs present in Mexico are adopting different strategies regarding the production of vehicles and the sourcing of parts and components. These changes will have profound consequences in the development of the industry within the country and for labour and employment. The green revolution and the fight against climate change require changes towards less polluting technologies. The Biden administration has implemented policies that tend to protect US manufacturers who employ unionised labour, dealing with protests from Canada and Mexico regarding the compliance with the rules agreed within the USMCA. There will be significant consequences for workers and employment in Mexico, forcing the design of policies that promote updating and training to meet the growing needs of workers and technicians with the qualifications and skills required by the new circumstances.
In the paper proposed, we analyse the main industrial policy measures that have been implemented by both Mexican federal authorities and the different state governments in which the automotive clusters have been formed. We compare the development of key indicators such as foreign direct investment, production, productivity, employment as influenced by the respective industrial policies implemented by the different state authorities. In each cluster, different OEMs prevail, determining different rhythms of technological development and supply chains characteristics.

The methodology.
The analysis is based upon the data published in the Economic Census, the data contained in the National Accounts and the input-output matrix, all published by INEGI, the data regarding FDI and trade balance in each state considering the NAICS classification, and the information available in diverse specialised publications and news. The firms' directory (DENUE) prepared by INEGI allows us to identify the firms' origin, size, and characteristics within each cluster. We also researched the different policies implemented at the federal and state levels of government regarding the promotion of FDI, education and training of labourers, tax breaks and other subsidies.

Main results
In each cluster, the strategies followed by the installed OEMs determine the type of suppliers of parts and components, their origin and the levels of training and skills development, as well as the degrees of productivity achieved. Companies of foreign origin largely control the automotive industry in Mexico, and the results achieved are mainly determined by foreign direct investment and the supply chain segments that accompany it. The analysis conducted allows us to explore the weight of local policies in determining the development of the industry and the possibility of overcoming the dependence upon foreign capital and the firms' strategies. We elaborate a map of the automotive industry in Mexico, the leading OEMs located, and the supply chains developed around them.

Practical and theoretical implications.
In Mexico, the main international brands of automobiles and practically all the leading suppliers of the automotive industry in the world are present. All these MNC constitutes an opportunity to acquire different skills and technologies and implement them. The profound diversification of suppliers and their economic and technological strength could be the key to successfully transforming the industry towards the new technological paradigm and its resilience and survival in a period of significant change and disruptions. It might also allow the Mexican industry to take definitive steps towards more self-determination and overcome its integrated periphery position. The critical discussion of the public policies that have been implemented is a piece of crucial knowledge to advance in such a direction.

Texte complet:

30th International Colloquium of Gerpisa
The Auto Industry Entering a Post-pandemic World
Challenges for Labour in a World of Shifting Trade and Technology
Industrial Policy and Regional Development of Automotive Industry in Mexico
Jorge Carreto, Alejandra Patiño, Jazmín Solares

Abstract
The automotive industry in Mexico faces several relevant threats, mainly from the substitution of NAFTA by the new Treaty USMCA, the disruption of global chains after the COVID-19 pandemics, and the change towards electrification and its impact on parts suppliers and labour. In this context, the OEMs present in Mexico are adopting different strategies regarding the production of vehicles and the sourcing of parts and components. These changes will have profound consequences on the development of the industry within the country and on labour and employment. The green revolution and the fight against climate change require changes toward less polluting technologies. The Biden administration has implemented policies that tend to protect US manufacturers who employ unionised labour, dealing with protests from Canada and Mexico regarding the compliance with the rules agreed within the USMCA. There will be significant consequences for workers and employment in Mexico, forcing the design of policies that promote updating and training to meet the growing needs of workers and technicians with the qualifications and skills required by the new circumstances.
This paper analyses the main industrial policy measures implemented by Mexican federal authorities and the different state governments in which the automotive clusters have formed. We compare the development of key indicators such as foreign direct investment, production, productivity, and employment as influenced by the respective industrial policies that the different state authorities have implemented. In each cluster, various OEMs prevail, determining different rhythms of technological development and supply chain characteristics.
The analysis is based upon the data published in the Economic Census, the data contained in the National Accounts and the input-output matrix, all published by INEGI, the data regarding FDI and trade balance in each state considering the NAICS classification, and the information available in diverse specialised publications and news. The firms' directory (DENUE) prepared by INEGI allows us to identify the firms' origin, size, and characteristics within each cluster. We also researched the different policies implemented at the federal and state levels of government regarding the promotion of FDI, education and training of labourers, tax breaks and other subsidies.
Keywords: Automotive Industry, Industrial Policy, Supply chains, Automotive Clusters.
Introduction
The growth of the automotive industry in Mexico since the signing of the North American Free Trade Agreement and other international treaties has been extremely rapid. From the mid-1970s to the early 1990s, five automakers (Ford, GM, Chrysler, Nissan, and Volkswagen) formed an oligopoly in a small domestic market protected by high barriers to entry. From being just a marginal producer of parts and vehicles, it became one of the world's largest producers and exporters of automotive products. This remarkable growth has resulted from a peculiar development in globalization, of integrated supply chains around some central nodes formed by multinational original equipment manufacturers. The political and economic changes at the end of the 20th century gave rise to a transformation of the automotive industry markets at a global level, which resulted in the emergence of Mexico and the countries of Central Europe as integrated peripheries (Brincks et al., 2018 ). These countries are close to major car-producing nations, have lower production costs, are members of regional trade agreements, and are highly dependent on foreign investment (Brincks, Domański, Klier, and Rubenstein, 2018; Pavlínek, 2018). On the other hand, some countries that also have a high percentage of foreign-owned firms and do not have an original manufacturer (OEM) based in the country but differ from the integrated periphery in that they have relatively high production costs and in someone of them is the world headquarters of multinational suppliers of parts and components, such as the United Kingdom and Canada (Pavlínek, 2018).
Currently, the automotive industry in Mexico presents as a broad mosaic made up of the leading companies in the field at an international level, both original manufacturers of automobiles and heavy vehicles and parts and components. The performance of the industry can be attributed, among other things, to the decision of the leading manufacturers (OEMs) to produce light vehicles (Brincks et al., 2018). The main international brands of automobiles and practically all the leading suppliers of the automotive industry in the world are present. The presence of all these MNC constitutes an opportunity to acquire different skills and technologies and implement them. The profound diversification of suppliers and their economic and technological strength could be the key to successfully transforming the industry towards the new technological paradigm and its resilience and survival in a period of significant change and disruptions. It might also allow the Mexican industry to take definitive steps towards more self-determination and overcome its integrated periphery position. Critical discussion of the public policies implemented by the various authorities is a piece of crucial knowledge to advance in such a direction.
Several relevant threats must be dealt with, mainly from the replacement of NAFTA with the new USMCA treaty, the interruption of global chains after the COVID-19 pandemic and the war in Europe, and the shift towards electrification and its impact on suppliers of parts and labour. The world has entered a new period of extreme tension, and the recovery of the economy from the pandemic has been restricted by the problems that have arisen in global value chains. The war in Europe has aggravated the problems of supply chains and relations between core countries, semi-peripheries and integrated peripheries. One can speak of a series of overlapping systemic crises - global ecological crisis, geopolitical crisis, health crisis due to the pandemic, food crisis, etc. In this context, the OEMs present in Mexico are adopting different strategies regarding the production of vehicles and the supply of parts and components. These changes will have profound consequences for the development of the industry within the country and for work and employment. The fight against climate change requires less polluting technologies. In the US, the Biden administration has implemented policies that tend to protect US manufacturers that employ unionised labour, dealing with protests from Canada and Mexico regarding compliance with the rules agreed within the USMCA. There will be significant consequences for workers and employment in Mexico, forcing the design of policies that promote updating and training to meet the growing needs of workers and technicians with the qualifications and skills required by the new circumstances.
The coronavirus pandemic and the war in Ukraine have brought supply chain disruptions, energy scarcity and inflation, making the transition toward new energy sources urgent. However, the bottlenecks in global supply chains and the lockdowns in China due to the surge in the Omicron epidemic are making this transition extremely difficult. Inflation is causing real wages to fall almost everywhere, and the scarcity of semiconductors is driving a shift in the automotive industry supply. The production of compact and subcompact cars has diminished in the last years, with the production of light trucks increasing. OEMs prioritise the production of higher-end vehicles, and consumers are turning to second-hand cars . Mexico is in a position where the trade relationship with the US offers essential opportunities, but it also faces threats and risks. National security and geopolitical considerations are the priorities in most countries today, and Mexico has to define its short- and long-term objectives and the industrial policy to attain them.
The leading international automobile brands and practically all the main suppliers of the automotive industry in the world are present in Mexico. These multinationals constitute an opportunity to acquire different skills and technologies and implement them. The profound diversification of suppliers and their economic and technological strength could be the key to successfully transforming the industry towards the new technological paradigm and its resilience and survival in a period of significant change and disruption. It could also allow Mexican industry to take definitive steps toward greater self-determination and overcome its position as an integrated periphery. The critical discussion of the public policies implemented is crucial knowledge to advance in this direction.
1. Industrial policy in Mexico.
The paradigm of industrialisation in Mexico can well be represented through the development of the automotive and auto parts industry. Since its installation in the country, the production and development models of technologies characterising it have resulted from decisions taken by OEMs' headquarters in foreign countries. Still, it has also been influenced by the design of public policies at the different levels of government (federal and state). The relationship between the automotive sector and public policies in Mexico has been very close, determining the country's industrial development. The specific development programs with which it has sought to promote the sector - the so-called "Automotive Decrees"- contain the main regulations referring to aspects such as the strengthening of national companies, relations between production and imports, a minimum proportion of national and regional content, and restrictions on foreign investment, among others.
During the early industrialisation period, the Mexican automotive industry grew according to the country's economic structure under the import-substitution policy. The state sought to strengthen the automotive industry by focusing on the domestic market. The context in which the Mexican automotive industry developed in its beginnings “...was characterised by exclusively assembly plants in which less than 20% of the components were of national origin, while sales were covered mainly with imported vehicles.” (Vicencio, 2007:215).
With the exhaustion of the import substitution model, the structural imbalances seriously affected the automotive industry, so the opening was imminent. By the mid-1980s, the border was opened to this industry, mainly for the purchase of auto parts, with which the policy of protectionism towards the automotive industry was practically ended. The lack of investment in productive infrastructure and technology hindered the policy aimed at strengthening international competitiveness through trade protection and export promotion. The conditions imposed by the oil crisis triggered a deficit in the balance of payments. The devaluation of the peso in 1976 and the recession that it caused deeply affected the automotive industry, leading to a crisis in the balance of payments mainly due to the lack of competitiveness observed.
Competition in the international market with Japanese cars put the North American automotive industry in check, with repercussions on the Mexican automotive industry. Consumer needs had changed, and smaller, more efficient, and cheaper Japanese cars were now being produced and sold with great success in the US market. This shift in consumer preferences practically changed the entire productive structure in the global automotive industry. "Faced with this situation, North American companies began to increase their investments in the northern part of Mexico, where considerable amounts of millions of dollars arrived, converted into production centres..." (Vicencio, 2007: 217), which also influenced the characteristics of the workforce employed in the sector since their qualifications and skills began to be taken into account, based on the performance and particular skills of the workers, with the consequent increase in their remuneration, which was already higher than the average for the manufacturing sector.
Since the early years of the 1960s, the automotive industry in Mexico has continually been growing. However, its trade balance remained in deficit, and consequently, its influence on national macroeconomic indicators was negative. This problem may be understood by observing the fluctuation in the growth rates of the main economic indicators presented in the following tables.
 
Figure 1. Indicators of the automotive industry in Mexico.
(A) Units and millions of pesos (B) growth rates
(A) (B)

Source: Own elaboration based on Ramírez (2010:40).
In the North American region, the Canadian automotive sector had been integrated with the US since 1965 with a Canada-US Automotive Free Trade Agreement (known as Auto Pact), and Mexico had begun to negotiate since the 1980s a trade agreement of the same nature, so the trade liberalisation policies in various sectors that started to be reviewed and negotiated by the federal government were not a surprise. In Mexico, towards the end of 1989, the "Decree for the Promotion and Modernisation of the Automotive Industry" was published to begin the liberalisation of the automotive trade gradually; also in 1989, the "Decree that grants exemptions to compact cars for popular consumption" was published, to promote the production and sale of small and cheaper cars, and grant tax exemptions to compact models that were registered in it.
Figure 2. Mexico: light vehicles. Automobiles and Light Trucks Production (units of cars).

INEGI. Registro Administrativo de la Industria Automotriz de Vehículos Ligeros. Publishing date: 08/01/2021
 
1st stage, 1920 - 1960: Beginning of the automotive industry
Incipient vehicle market in Mexico by foreign assemblers.
• Establishment of the first assemblers (Buick, Ford, General Motors and Automex).
• Manufacture of vehicles under a CKD system (complete assembly kit) from the matrix.
• Almost null productive chain.
2nd stage, 1960 - 1990:
1962 - First automotive decree: To increase the production volume and promotion of domestic content.
1972, 1977, 1983 - Automotive Decrees: To balance the trade balance and produce under an export logic.
1989 - Automotive Decree: Trade liberalisation process for the automotive sector.
• New car manufacturers (Nissan, Volkswagen, and DINA).
• Increase 2.5-fold the production of vehicles.
• Emergence of the auto parts sector.
• Transfer of processes to Mexico to produce parts.
• Incipient supply networks.
• Vertical integration of assemblers and parts producers.
3rd stage, 1990 - 2020 -
1994 - Entry to NAFTA.
2003 - Automotive Decree: For the strengthening of competitiveness.
2008 - World economic crisis and recovery of the sector.
• Opening to the importation of new vehicles.
• Reduction of the percentage of components of national origin for export.
• Evolution of assembly companies and auto parts to greater integration and technological development.
• Expansion of existing plants.
• Strengthening of supply.
• 2010 - Gradual recovery from the crisis, start of premium car manufacturing in Mexico.
• Installation of new manufacturing companies. (Source: PROMEXICO (2018:9).
A 4th. stage could be added, starting with the new trade treaty, the T-MEC for Mexicans, USMCA for the USA.
2. NAFTA (1993) and TMEC (July 2020)
The Mexican automotive industry's performance and trade deficit led to a change in government strategy toward export promotion and trade liberalisation. Pressured by the US government, President Carlos Salinas (1988-1994) began the complete liberalisation process in December 1989 with the "Decree for promoting and modernising the automotive industry". Through this, the government sought a free automotive trade by allowing the gradual importation of new cars, import compensation, and regulating the degree of national integration, a precedent of NAFTA. The liberalisation of the Mexican economy was intended to make intermediate inputs and capital goods more accessible to the Mexican industry and thus lower production costs and increase the competitiveness of industrial production.
The NAFTA established free access to markets, market rules, investment, intellectual property, services, and dispute resolution. It also included the elimination of all tariff and non-tariff barriers to automotive imports from Canada and the United States. Thanks to the Treaty, “in the year 2000, the proportion of exported vehicles grew faster than that destined for the domestic market, so that by the year 2000, the number of exported cars was three times greater than that destined for the domestic market, and by 2015, this proportion rose to 4.3 times.” Ruiz (2016: 7).
The relaxation of rules attracted new foreign direct investment in the automotive industry: in the early 1990s, Chrysler, GM and Nissan built three full-scale assembly plants. Honda built one in El Salto in 1995 and Toyota in Tijuana in 2004. Other firms followed in 2004: BMW, Daimler Benz, Hyundai Motor Group, Kia Motors, Mazda, Volkswagen-Audi. The NAFTA triggered the negotiation of new trade agreements with other countries: Mexico has signed 13 free trade agreements with 52 different countries. The federal government issued the "Decree to support the competitiveness of the terminal automotive industry and the promotion of the development of the internal automobile market", seeking to increase the competitiveness of the automotive sector and strengthen the internal market.
As a reflection of the crisis in the automotive sector in the US, at the end of 2008, the effects of automotive production in Mexico began to be felt due to its integration with North American countries, the consequences of which were more severe during the first half of 2009. The automotive companies in Mexico reduced the operating costs to face the drop in sales with technical stoppages, temporary and unskilled labour, reduced wages during technical stoppages, thinning of inventories, and reduced working hours and production volumes, among the most severe. According to Covarrubias (2014), in 2008, several mechanisms were implemented to limit imports of used cars from Canada and the US, based on their vehicle characteristics, to maintain the restriction on imports of used vehicles, which would disappear gradually. The following graph shows the proportions of exports, imports, and domestic sales to production.
Figure 3. Mexico: Light Vehicles
Production, Exports, Imports & Domestic Sales (units of vehicles)

Total sales in Mexico include local production + imports (exclusively new vehicles)
Source: INEGI. Registro Administrativo de la Industria Automotriz de Vehículos Ligeros
To face the effects of the crisis and support the automotive industry in Mexico, in January 2009, the federal government implemented the following programs:
1) Program for the Preservation of Employment
2) Emerging Support Program for the Automotive Industry aimed at financial intermediaries and automotive distributors to cushion the impact of the reduction in automobile sales in the Mexican market.
3) Vehicle Renewal Program, aimed at owners of automobiles with age equal to or greater than ten years
In 2012, the federal government implemented the "Strategic Program for the Automotive Industry 2012-2020". Even though Mexico had advanced in its position as a global producer and exporter of vehicles and auto parts - the value of its exports grew 108% between 2000 and 2011 -, ranked as the eighth producer and the fourth world exporter of vehicles and had in its territory the leading global vehicle manufacturers, it had not developed its full potential. Since the country was not yet a centre of technological R&D, which is a necessary condition to ensure a long term, relatively independent development, and an upgrade in its position as an integrated periphery within the global production network, it was necessary to have a coordinated strategy that would take advantage of the areas of opportunity that its privileged relationship with the US and Canada granted.
The advances and actions that were carried out within the framework of the said program addressed the following axes:
1. Strengthening of the internal market.
2. Improvement of the business environment for the automotive industry.
3. Research, Technology Development, and Innovation:
The repercussion of the different automotive decrees and trade agreements signed by Mexico on the production of the domestic automotive industry can be seen in the following graph, which shows automotive production by stages: in the import substitution phase, the production capacities, during the debt crisis of 1982, when an export promotion scheme was implemented, the figure of one million a year was reached around 1990, and with NAFTA, the automotive sector was further promoted, this time reaching a production of more than 3 million vehicles.
Figure 4. Mexico: automotive production 1950-2014

Source: Asociación Mexicana de la Industria Automotriz A.C. (AMIA). Asociación Nacional de Productores de Autobuses, Camiones y Tractocamiones, A.C. (ANPACT).
Twenty-five years after the entry into force of NAFTA, its replacement by the T-MEC/USMCA required a negotiation in which the most relevant issues were: rules of origin, trucking, dispute settlement and the US trade deficit. In addition, issues such as labour cost, environment and intellectual property were also considered essential.
In this new agreement, the automotive industry is one of the leading sectors affected; since the supply chains of each assembly plant must include many more raw materials, components and systems originally produced in the region to sell duty-free within North America, it is required to achieve up to 75% of original parts in the total cost of the parts of each car in the next four years. Therefore, many more materials, components and systems originally produced in the North American region must be included.
The systems requiring increases in their regional content requirement (RVC) from 66% to 75% are axles, engines, chassis and bodywork, suspension and transmission, and batteries, including lithium; the main components that require an increase in regional value content (RVC) from 62.5% to 70% are interior seat belts airbags and seats, control panel and air conditioning parts, bearings brakes and fenders, fuel supply parts, transmission parts and exhaust, tires and wheels, electric motors, assemblies and glass parts.
The main challenges for OEMs are to substitute global for regional purchases; to finance tooling and dies for their suppliers; to speed up their component and system release procedures.
The challenges for suppliers in the supply chain to improve and streamline the certification of origin process are:
• Tier 1 - to find or develop systems made in the region, preferably in Mexico due to the cost of manufacturing, and locate Tier 2 suppliers in the region.
• Tier 2 - to locate current suppliers of raw or semi-processed materials interested in increasing their product portfolio and investing in new machinery and technology.
• Tier 3 - to invest in equipment and technology that would allow them to increase their productive capacities.
On the issue of labour cost, the T-MEC is subject to a rapid dispute settlement mechanism, which includes dealing with breaches related to freedom of association and the right to collective bargaining in Mexico, which requires companies to comply with the labour reform and to ensure the freedom of employees to choose their union affiliation, the transparency of the union registry as well as of collective contracts. The expectation regarding the percentage of labour cost in a car, with wages equivalent to a minimum of US$16 per hour, gradually increases from 30% in 2020 to 40% in 2023.
Other changes included in the T-MEC are improving and streamlining the origin certification, with a validity of 4 years. New chapters on digital commerce, development and promotion of SMEs, environment, and regional competitiveness were included, as well as anti-corruption, good regulatory practices, and macroeconomic policy.
3. Automotive clusters in Mexico and their position regarding industrial policy (Automotive and auto parts sector)
Industrial policy is “a central component in designing government strategies to promote a more dynamic and equitable economic growth. Although there is no single model of industrial policy, two general orientations can be identified: the transversal one that seeks to promote the sustainability of existing companies and the incorporation of new activities, and the selective one, aimed at promoting specific activities or sectors. These interventions are based on the recognition that the strength of the national industry is one of the historical responsibilities of the state.” (Micheli and Carrillo, S.F.)
In Mexico, the general industrial policy guidelines adopted by the federal government have been based on the following strategies:
1) Strengthen the internal market through credit for purchasing new vehicles and regulating the importation of used cars.
2) Build a business environment that encourages the productivity of the automotive industry and the formation of a national network of world-class suppliers.
3) Promote technological development and innovation to strengthen the link between the academic sector, the automotive industry, and the government.
4) Access to new export markets through treaties and trade agreements with various economic blocks and regions.
However, the lack of coordination and specific actions regarding these decrees and programs at the federal and state levels has prevented a synchronised advance in the automotive industry. The result has been the placing the states as guardians of their industrial policy in a kind of competition between federal entities to attract global companies and their capital, and that, together with the initial advantages of location and labour costs, has implemented important state public initiatives that generate a competitive environment between the states in which the automotive industry predominates.
Companies in the automotive industry have organised themselves through Automotive Clusters created under the legal figure of civil associations, intending to unite the efforts of companies belonging to the automotive sector at its different levels to promote the development of the sector and promote their joint growth and competitiveness in the region, involving governments and educational and research institutions in this initiative.
These intermediate organisations - the Automotive Clusters- aim to organise the individual efforts of companies to create synergies reflected in the increase in growth and competitiveness of the automotive sector in the region in which they are located. They involve high education institutions by creating academic and training programs that train specialised labourers and research and development processes. The local government acts as a facilitator of programs and instruments through the required industrial policy actions.
Currently, most of the automotive industry in Mexico is grouped into eleven Automotive Clusters, located mainly in the north of the country, on the border and in some central states.
Auto Cluster Chihuahua
The state of Chihuahua is the headquarters of the "Auto Cluster Chihuahua", which brings together around 150 companies related to the automotive sector, mainly export-oriented. These form an integral part of the North American automotive production chain, thanks to incorporating the most advanced technologies and processes in industrial production. The automotive industry in Chihuahua constitutes its main economic engine; it generates 21% of the total number of jobs in the state; its most important branch of activity is the manufacture of parts for vehicles, with 20.9% of the value of total gross production.
Chihuahua has 56 industrial parks in seven cities, five research and advanced engineering centres, and 3 Technological Innovation and Development parks. In the state, there are qualified labourers.
Cluster of the Advanced Manufacturing and Automotive Industry of La Laguna (CIMAL)
This cluster is in a region extending to two states of the Mexican Republic known as La Comarca Lagunera. In the economic aspect, its economic boom has been possible thanks to its geographical position and its railway infrastructure that runs from north to south and from east to west; It has eight industrial parks. Currently, the industries related to the automotive activity supply Nissan in Aguascalientes, General Motors in Silao and Toluca, Chrysler supplies Mercedes and BMW in Saltillo and Volkswagen in Puebla; the International and Caterpillar in Monterrey; in Hermosillo to Ford and the Toyota distribution centre in San Antonio, Texas.
Among the companies supplying inputs can be mentioned: Sumimoto (JAP): electrical harnesses; Trim Masters (JAP): car seats; Takata (JAP): airbags; Montupet (FR): engine heads; Metzeler (USA): rubber gaskets; Delphi (USA): ignition systems; John Deere (USA): diesel engines, equipment and for tractors and construction; Johnson Controls (USA): accumulators; Alcoa (USA): electrical harnesses; Fundilag (USA): auto parts; Cooper Standard USA: fluid systems; Linamar (CAN): gasoline engines: Essex Superior: magnet wire: Lincoln (USA): welding; European Kone: Elevators and Electronics Thomson-RCA.
Coahuila Automotive Industry Cluster (CIAC)
The automotive companies of the state of Coahuila created the Coahuila Automotive Industry Cluster to promote collaboration in this industrial sector and increase competitiveness in the state through the strategic lines that make up its committees: Human Capital, Operations, Innovation and Industry 4.0, and Social Responsibility. The CIAC is in the Saltillo-Ramos Arizpe area in Coahuila, where ten of the most important industrial parks are located, with more than 300 auto parts manufacturers that generate 40,000 direct jobs in that area alone.
In Coahuila, the automotive sector is relatively important, representing more than half (63.4%) of the entity's manufacturing production. The most important branch of activities is the manufacture of cars and trucks, with 20.1% of the total production value of 400 thousand units per year and 25% of the national production of automobiles.
The automotive companies in Coahuila are Stellantis (former Fiat Chrysler Automobiles FCA), Daimler Freightliner and General Motors (GM), which has generated an effect of attraction towards the installation of companies in the automotive industry, turning the state into a large manufacturer of auto parts and vehicles.
Automotive Cluster of the State of Mexico (CLAUTEdoMex)
The most important branch of activity in the entity is the manufacture of automobiles and trucks, concentrating 9.1% of the total production value and generating 10% of the industry's total value in the country.
There are nine assemblers: GM, Stellantis, Volvo, Daimler, Nissan, BMW, Ford, Peugeot, and Autos Mastretta. It is the state with the highest concentration of assemblers in Mexico. Two hundred forty-three supplier companies manufacture bodies and trailers, parts and components, and rubber products, distributed in its main industrial municipalities. The CLAUTEdoMex is integrated of original equipment manufacturers (OEMs), T1, T2 and T3 suppliers, and service companies dedicated to consulting, logistics and customs brokers, among others.
Central Zone Automotive Cluster (CLAUZ)
This cluster includes automotive firms in Puebla and Tlaxcala. Its main strategic allies are universities and the government collaborating to achieve competitive automotive and industrial development improvement. In both states, the most important economic activity is the production of cars and trucks, with 23.2% and 9.4% of the total production value in each state, respectively. The CLAUZ seeks to be the meeting space for the automotive industry ecosystem in the Puebla-Tlaxcala region that facilitates and implements the link, collaboration and coordination between companies, HEIs and government to promote and strengthen capacities, as well as human competencies. , technological and productive activities of companies in the industry, and building the conditions for an environment that favours the integral and sustainable development of the entire value chain in the region.
Automotive Cluster of Nuevo León (CLAUT)
The CLAUT was founded in 2007; it is a civil association with top-tier manufacturers from the automotive industry and academic and government institutions related to the industry. It seeks the development of the integrated chain from vehicle assemblers to T1, T2 and T3 suppliers, as well as with support companies, such as logistics and consulting service companies, among others. Its objectives are to have a shared vision, develop specialized personnel for the sector, strengthen the base of local suppliers, develop its technology, changing the vision of the industry from being only manufacturing to "mind-manufacturing" through achieving an effective link with the universities and the state government for the benefit of all involved.
Public and private funds finance CLAUT's operations, a long-term strategic plan is followed, and there are specialized committees in three main areas: human resources, investment, and growth and innovation. The founding group of CLAUT included seven companies: Arnecom, Ficosa, Grupo IMSA, Metalsa, Navistar, Nemak and Vitro. At the same time, the Tecnológico de Monterrey and the Universidad Autónoma de Nuevo León were represented on the Council. On the part of the government, the Secretariat for Economic Development and the Institute for Innovation and Technology Transfer participated.
Its most important activity is the development of specialised personnel through links with high education institutions (HEIs). It actively works on creating engineering careers in automotive design at the Tecnológico de Monterrey and the Universidad de Monterrey, graduates in product and process engineering, and training the inter-institutional master's degree the cluster companies can form internal engineering groups. It has a simulation and design centre, the "Driven Center", in which design engineers are trained, and engineering work is carried out that responds with innovations to the challenges of global mobility for the benefit of the cluster members.
As areas of opportunity, it identifies the strengthening of the region's technological proposal with universities and design and research centres, as well as seeking synergies with other clusters to address technological opportunities in the field of Industry 4.0; develop the technical skills that the sector requires to improve competitiveness and improve the integration of national content in the value chain through the development of suppliers. One of the entity's most important branches of activity is parts for motor vehicles, contributing 5.4% of the total value of production.
Guanajuato Automotive Cluster (CLAUGTO)
The CLAUGTO contains seventy T1 members, seventeen in the area of Supplier Development, fifteen academic institutions, five OEMs (Advisory Council), and twelve collaborators (government and organizations). This Cluster was created in 2012 and carries out its activities through six working committees.
Guanajuato is the only state in the country with five automobile assembly plants: General Motors, Mazda, Volkswagen, Honda, and Toyota.
Querétaro Automotive Cluster
The manufacture of vehicle parts in Querétaro represents 14.9% of the total production value. Its cluster was founded in 2013 with the participation of the leading automotive companies in the state, universities, research centres and the state government.
Since its creation and to date, this cluster has promoted the increase in the competitiveness of the sector in the region through projects and actions that impact the development of labourers, the integration of local companies into supply chains and the generation of strategic information that facilitates business decision making.
San Luis Potosí Automotive Cluster
This cluster groups around six hundred companies, among which two assemblers and two hundred and thirty-three auto parts companies. The objective of the cluster is stated to “Strengthen the orderly, harmonious and sustainable growth of the Automotive Industry in SLP, promoting the creation of integration bridges and value chains under a solid framework of regulations and competitiveness, thus generating the link between the company, the academy and the government.”
The manufacture of parts for motor vehicles represents 11.6% of the total production value in the state.
Aguascalientes Automotive Cluster
In Aguascalientes, there are two automotive clusters, the Grupo GIRAA Automotive Cluster of Industries of the Automotive Branch of Aguascalientes, made up of five OEMs, eleven T1 and T2 component suppliers, nine process manufacturing suppliers; and FOMOAUTO (Fomento Automotriz A.C.), an automotive development cluster dedicated to integrating companies in the automotive industry and auto parts.
The entity's most important branch of activity is automobile manufacturing, with 29.7% of the total production value. Nissan has been the leading company in Aguascalientes since 1982, when it began operations with an investment of 1,300 million dollars; likewise, in 2013, the Nissan Aguascalientes plant, A2, began operations.
Sonora Automotive Cluster
In the state of Sonora, 29.5% of the total production value is the manufacturing of automobiles and trucks. It produces 443,000 vehicles annually and has forty-two Tier 1 and Tier 2 supplier companies.
4. Indicators (factors) of Industrial Policy related to the automotive sector in Mexico and its behaviour.
Even though the parts and components production has been an essential complement to the production of automobiles, its magnitude is overwhelmed by that of automobile and light duty motor vehicle production (NAICS 336110). The following graph (Figure 5) compares several branches of the automotive industry based on figures taken from the Economic Census 2004, 2009, 2014 and 2019, published by the Instituto Nacional de Geografía y Estadística (INEGI) and converted to dollars using the average exchange rate for each year. The NAICS industry (six-digit classification) selected correspond to the list of items included in the analysis of international trade adopted in Russo, et al. (2021) identified as automotive components and parts. In Annex 1 a description of the codes and their correspondence between SITC, Harmonised and NAICS.
In Figure 6, data show the Gross Census Value Added to Total Gross Production, that is, "the percentage of the value of production that is added during the work process by the creative and transformation activity carried out by employed personnel, capital and the organization (factors of production), exerted on the materials that are consumed in carrying out the economic activity, with respect to the value of all the goods and services produced or marketed by the economic unit as a result of the exercise of its activities" (INEGI. Censos Económicos 2004, 2009, 2014, 2019).
Figure 5. Total Gross Production in the Automotive Industry.
Million dollars
Source: INEGI. Censos Económicos 2004, 2009, 2014, 2019.
Both graphs employ the same set of representative variables. Even though the value of gross production in the automobile and light vehicle production is overwhelmingly greater, the amount of value added is inferior to other industries. The contribution of this industry to value added is 28.7% in 2003, 22.2% in 2009, 23.3% in 2013 and 26.8% in 2018. At the same time, it is the production of automobiles and light vehicles within the value chain, that is, the big OEMs, that control the entire global production network and dictate the development path of the whole industry.
Figure 6. Gross Census Value Added to Total Gross Production (percentages)

The development of an internal market is crucial if the integrated peripheries wish to achieve some independence in determining their industrial policy. But without a coherent and centralised industrial policy dictating the path that the development of the industry must follow, the various policies implemented at a local level by the various states while competing to attract foreign direct investment and promote the development of local industries will not be able to control and develop an industry that serves the domestic market.
As long as the automotive industry in the integrated periphery serves the market needs of developed countries, the OEMs will follow the consumer preferences of these countries and the dependence from decisions taken in the core countries will prevail on top of the needs of the integrated periphery.
Annexe 1. Industrial codes classification of variables selected in Census data.
Table List of automotive components and parts, by group. SITC classification

Source: Russo et al. 2021  
Table Corresponding classification SITC, HTC and NAICS for the variables selected.
SITC code HARMONISED NAICS code
MISCELLANEOUS PARTS 7841 8706 336111, 336112, 336211, 336120
78421 8707.10 336111, 336211, 336214
78425 8707.90 333111, 333120, 336211
78431 8708.10 336370, 336390, 336399
78432 8708.21,.29 336214, 336360, 336370, 336390, 336399
78433 8708.30 333111, 336340
78434 8708.40 332111, 333111, 333120, 336330
78435 8708.50 333111, 333120, 336350
78436 8708.60 333111, 333120, 336350
78439 8708.70-.99 333111, 333120, 336330, 336360, 336390
82112 9401.20 336360, 337124, 337125
ENGINES AND PARTS 71321 8407.31-.33 333618, 336310
71322 8407.34 333618, 336310
71323 8408.20 333618
77831 8511.10-.80 336320, 336322
77833 8511.90 336320, 336322
77834 8512.10-.40 336320, 334290, 334511, 335999
RUBBER AND METAL PARTS 6251 4011.10 326211
62551 4011.61-.69 326211
62559 4011.92-.99 326211
62592 4012.11-.19 326212
62593 4012.20 930000, 920000
62594 4012.90 326211
69915 8302.30 333995, 332510
69961 7316.00 332999
ELECTRICAL AND ELECTRIC PARTS 76211 8527.21 334310
76212 8527.29 334310
77812 8507.10-.80 335911, 910000
77823 8539.10 336320, 335110
SITC code HARMONISED NAICS code
MISCELLANEOUS PARTS 7841 8706 336111, 336112, 336211, 336120
78421 8707.10 336111, 336211, 336214
78425 8707.90 333111, 333120, 336211
78431 8708.10 336370, 336390, 336399
78432 8708.21,.29 336214, 336360, 336370, 336390, 336399
78433 8708.30 333111, 336340
78434 8708.40 332111, 333111, 333120, 336330
78435 8708.50 333111, 333120, 336350
78436 8708.60 333111, 333120, 336350
78439 8708.70-.99 333111, 333120, 336330, 336360, 336390
82112 9401.20 336360, 337124, 337125
ENGINES AND PARTS 71321 8407.31-.33 333618, 336310
71322 8407.34 333618, 336310
71323 8408.20 333618
77831 8511.10-.80 336320, 336322
77833 8511.90 336320, 336322
77834 8512.10-.40 336320, 334290, 334511, 335999
RUBBER AND METAL PARTS 6251 4011.10 326211
62551 4011.61-.69 326211
62559 4011.92-.99 326211
62592 4012.11-.19 326212
62593 4012.20 930000, 920000
62594 4012.90 326211
69915 8302.30 333995, 332510
69961 7316.00 332999
ELECTRICAL AND ELECTRIC PARTS 76211 8527.21 334310
76212 8527.29 334310
77812 8507.10-.80 335911, 910000
77823 8539.10 336320, 335110
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