Mexico s Automotive Industry Summit. Challenges for Mexico s Automotive Domestic Market

Transcription

1

2 Mexico s Automotive Industry Summit Challenges for Mexico s Automotive Domestic Market December 7, 2017

3 1. Trump s incentives to automotive production

4 LESS TAXES Lower corporate tax rate was one of Trump's great promises to private sector. Currently this tax averages 35%, but may be higher in some states. Trump promised to lower it to 15%; that is, 20 percentage points less. Recent Events The U.S. Senate narrowly approved the tax bill overhaul on Saturday (december 2nd, 2017), moving Republicans and President Trump a big step closer to their goal of slashing taxes for businesses. Reuters December 1, It would be the largest change to U.S. tax laws since the 1980s Once the Senate and House of Representatives reconcile their respective versions of the legislation, the resulting bill could cut the corporate tax rate from 35 percent to 20 (percent)). D. Trump

5 Decrease regulation Regulations are out of control" "It's about rationalizing the large and horrible permit processing and reducing regulatory charge on manufacturing industry" TPP rejection Protectionism Establish border taxes on Mexican products Renegotiate NAFTA

6 NAFTA Modernization Renegotiation formally started on August 2017 There have been 5 rounds of renegotiation in 4 months The 6th round will be held in Washington, from 11 to 15 december as a technical meeting to organize 2018 process. Progress in negotitation: Chapter on small and medium enterprises Trade facilitation Telecommunications Digital commerce. Pending issues for 2018: Chapter19, increase of regional content: actual 62.5% Trump s proposal: 85%

7 Mexico: NAFTA Negotiations The Ministry of Economy state its positioning about no change in rules of origin in automotive sector (62.5%). A different mix regarding the rule of origin will lead the three countries (USA-MEX-CAN) to loose competitiveness. To increase to 50% USA share of the 85% rule of origin proposed by Trump s Administration, is not possible. Nowadays the U.S. content on mexican manufactured vehicles represents around 37-40%.

8 Relevant discussion for the automotive industry Fuente: Wilson Center. Mexico Institute. En

9 3. Impacts on the Mexican economy

10 04/01/ /01/ /02/ /02/ /03/ /03/ /04/ /04/ /04/ /05/ /05/ /06/ /06/ /07/ /07/ /08/ /08/ /09/ /09/ /10/ /10/ /10/ /11/ /11/ /12/ /12/ /01/ /01/ /02/ /02/ /03/ /03/ /04/ /04/ /05/ /05/ /06/ /06/ /07/ /07/ /08/ /08/ /08/ /09/ /09/ /10/ /10/ /11/ /11/2017 Depreciation of Mexican peso USA Elections Trump s Take Over Suspension of auctions (dollars) NAFTA Renegociation Source: AMDA with information from Banxico. During 2016, mexican peso depreciate 19.2% against US dollar. In 2015, depreciation reached 16.8% and in 2014 it was 11.24%. During 2017, mexican peso has had a recovery of 10.1%.

11 / / / / / / / / / / Annual %Variiation Monthly % Variation Inflation: producer and consumer index October INPP (%Annual Variation) INPC (% Annual Variation) INPP (% Monthly Variation) Source: AMDA with information from INEGI. Annual Variation (%) Monthly Variation (%) INPC INPP INPC INPP

12 Ene 2008 Abr 2008 Jul 2008 Oct 2008 Ene 2009 Abr 2009 Jul 2009 Oct 2009 Ene 2010 Abr 2010 Jul 2010 Oct 2010 Ene 2011 Abr 2011 Jul 2011 Oct 2011 Ene 2012 Abr 2012 Jul 2012 Oct 2012 Ene 2013 Abr 2013 Jul 2013 Oct 2013 Ene 2014 Abr 2014 Jul 2014 Oct 2014 Ene 2015 Abr 2015 Jul 2015 Oct 2015 Ene 2016 Abr 2016 Jul 2016 Oct 2016 Ene 2017 Abr 2017 Jul 2017 Oct 2017 Variación (%) Anual Variación (%) Mensual Automotive Sector Inflation General Inflation & Vehicle Inflation October General (Var % Anual ) Vehículos (Var % Anual) Vehículos (Var % Mensual) Source: AMDA with information from INEGI. General inflation in October 2017 was below vehicle inflation. In terms of monthly variation, vehicle inflation was below general inflation. Annual Variation (%) Monthly Variation (%) General Vehicles General Vehicles

13 Mexico: Target Interest Rate Target Interest Rate 20/02/ /12/ /12/ /11/ /12/ % points 02/12/ /12/ % points 04/12/ /12/ /12/ Source: AMDA with information from Banco de México. 1 / Target established by the Banco de México for the interest rate on one-day interbank funding operations..

14 Business and Consumer Perception

15 E-08 A J O E-09 A J O E-10 A J O E-11 A J O E-12 A J O E-13 A J O E-14 A J O E-15 A J O E-16 A J O E-17 A J O Points Sales (Units) 70 Business Confidence and Sales November , , , ,000 50, Business Confidence (Manufacture) Business Confidence (Transport Equipment) Ventas Business Confidence Manufacture Annual change (%) nov nov 2016: 5.8% Monthly change (%) nov oct 2016: -0.4% Transport Equipment Annual change (%) nov nov 2016: 3.7% Monthly change (%) nov oct 2016: -0.5% Source: AMDA with information from INEGI Note: refering to manufacture. It rescues the perception of the business community about: Adequate time to invest, present and future economic situation of the country, present and future economic situation of the company.

16 E-06 E-07 E-08 E-09 E-10 E-11 E-12 E-13 E-14 E-15 E-16 E-17 (Units) CCI Consumer confidence and sales 5th. Component November Sales 5th component Complementary index Source: AMDA with information from INEGI ICC 5th Componente Annual variation % nov nov 2016: 11.9% Monthly variation % nov 2017 oct 2016: 6.0% Complementary Confidence Index Annual variation % nov nov 2016: 18.6% Monthly variation % nov 2017 oct 2016: 6.1% Comparing the current economic situation with that of a year ago, how do you consider at the present moment the possibilities for you or any of the members of this household to make purchases such as furniture, television, washing machines, other household appliances, etc.? Are any members of this household or you are planning to buy a new or used car in the next 2 years?

17 Domestic Automotive Market Report November 2017

18 Domestic automotive markets Variation % 17,550,351 17,479, ,824,968 1,575, ,986,389 2,476, ,147,007 1,034, Canada 3.0% Mexico 18.6% E.U.A. 0.4% Colombia 20.8% Ecuador -18.5% Perú -1.6% Growth in domestic market 2016 Light vehicles Brazil -19.8% 1,823,299 1,770, ,603,672 1,351, Source:AN, WSJ, FEDERAUTO, AMDA, DESROSSIERS, FENABRAVE Chile 8.3% Argentina 11.8% Source: ALADDA. AN, Desrossiers 17

19 International domestic markets November January-November Variation % Variation % 1,393,971 1,375, ,852,341 15,820, , , ,848,919 1,700, , , ,967,392 1,787, ,170 92, ,131,988 1,050, , , ,914,551 1,823, , , ,371,600 1,411,

20 1 Only including: F450, F550. Light vehicles sold November November Variation Units % Subcompact 58,245 49,881-8, % Compact 36,112 33,344-2, % Luxury 7,350 7, % Sportive % SUV s & Vans 32,783 32, % Pick Ups 18,941 17,118-1, % Heavy Trucks % Total 154, ,434-13, % November 2017 registered the seventh negative figure of the year.

21 102,200 97,683 78,553 75,582 64, % -4.4% -19.6% -17.4% 16.4% 126, , ,423 91,826 83, % -3.4% Light vehicles sold from 2006 to 2017 November 10.5% 9.4% 11.2% 13.0% 154, , % -8.5% Sales: 2017 vs % 2017 vs % 2017 vs % 2017 vs % 2017 vs % 2017 vs % 2017 vs % 2017 vs % 2017 vs % 2017 vs % 2017 vs % January-November 1,190, , ,502 1,002, , , , , , ,957 Source: AMDA. 1,411,105 1,371, % -2.6% -5.1% 7.9% 10.4% 11.0% 7.7% 6.2% 18.8% 18.5% -2.8% % Source: AMDA Sales: 2017 vs % 2017 vs % 2017 vs % 2017 vs % 2017 vs % 2017 vs % 2017 vs % 2017 vs % 2017 vs % 2017 vs % 2017 vs %

22 Miles de unidades 1,700 1,650 1,600 1,550 1,500 1,450 1,400 1,350 1,300 1,250 1,200 1,150 1,100 1,050 1, ene99-dic99 Impacts on the consumer (Annualized series from 1999 to 2017) ene00-dic00 ene01-dic01 ene02-dic02 ene03-dic03 Increase indiscriminate imports ene04-dic04 ene05-dic05 ene06-dic06 ene07-dic07 Distrust & Consumer debt ene08-dic08 ene09-dic09 International Crisis ene10-dic10 ene11-dic11 ene12-dic12 Recovery ene13-dic13 ene14-dic14 Market adjustment ene15-dic15 ene16-dic16 Source: AMDA with information from AMIA

23 573, , , , , , , , , , ,071 Financing for the acquisition of vehicles 875, , , , , , , ,491 1,256,489 1,230,166 1,064, % 61.7% 54.6% 48.5% 51.4% 52.5% 56.3% 60.0% 62.1% 66.5% 68.5% Financed units Sold units % Vs sold units Share on total units financed: In the period January-October 2017, 842 thousand 71 units financed were registered, representing an increase of 0.8% compared to 2016, equivalent to 6 thousand 321 more units. The figures for this period are 47% higher than those of January - October de , % 34, % 595, % January - October de , , % 4.1% 599, % Cap ves Banks Autofinancing Sourse: AMDA with information from JATO Dynamics. All rights reserved JATO Dynamics * Note: Includes information from most lending institutions, therefore it is a trend indicator.

24 Weighted average rate Different types of credits Personal Payroll loans Automotive 0 Source: Banco de México

25 % Permanent and contingent insured workers (persons) Annual Variation (%) Persons ,000,000 20,000, ,000, ,000, ,000, Source: AMDA with information from INEGI January-October 2017 Vs January-October % Oct-Sep %

26 Used Vehicles Imported (units) October January-October Variation Variation Units % Units % Used Imported 13,152 10,647 2, % 100, ,862-27, % Domestic Market (new vehicles) Jan- Oct Used Imported Vehicles Jan- Oct % Share on new vehicles sold , , , , , , , , , ,491 1,064,774 1,256,489 1,230, ,604 1,282, , , , , , , , , , , , % 143.0% 108.5% 100.6% 34.6% 54.9% 73.0% 44.8% 60.8% 45.7% 13.6% 10.2% 8.2% Fuente: Administración General de Aduanas. SHCP. As of October 2016, imports of used vehicles were 100 thousand 317 units, equivalent to 8.2% of total sales of new vehicles sold. Imports decreased 21.5% compared to the same period in 2016, which represented 27,545 units less.

27 Consumers by region (Variation % January-October2017 January-October 2016) CENTRO GOLFO PENINSULAR METROPOLITANA NOROESTE NORTE OCCIDENTE SUR JAN-OCT JAN-OCT Variation % (%) 2016 (%) 2017 Growth contribution CENTER 290, , GULF PENINSULAR 123, , METROPOLITAN 217, , NORTH EAST 97, , NORTH 209, , WEST 138, , SOUTH 135, , TOTAL 1,212,376 1,183, Fuente: AMDA con información de Urban Science. Regionalización utilizada conforme a IRAES. Banamex Note: Refers to buyer information. Does not include information on Isuzu, Mini, Smart, Audi, BMW, Jaguar, Land Rover, Mercedes Benz and Porsche The information of buyers refers to the records according to the place or city where the purchased unit has been domiciled.

28 Mexico: Hybrid & Electric Vehicles Today we are still below 1% worldwide. The International Energy Agency has requested that this figure increase to 1.7% in 2020 and to 10% in ,000 6,000 5,000 4,000 3,000 H&EV (Units) 6,755 2,000 1, Regardless of the increase in the sale of this type of vehicles, they only represent 0.42% of the Mexican market according to 2016 figures ,203 1,688 Top Hybrid vehicles sold in mexican market (2017): Prius-Toyota, Fusion-Ford y Niro-KIA

29 Units Monthly forecast The volume of units sold in November 2017 were 141, 434 units, with AMDA estimated for this period 1.4% above the real figure according to the estimated 1,530,000-1,540,00 units by November Variation % Forecast December ,260 Forecast (Basic) 143, % 171 mil 919 (Low) 137, % 162 mil ,976 Real 141, , ,477 Real Basic Low Observados (Reales) Básico Bajo 122, , , , , , , , , , ,558 E F M A M J J A S O N D Source: AMDA

30 Automotive Industry: border issues Technology & Innovation Emissions NO Accidents Property

31 Future Perspective International Challenges Uncertainty related to the future course of economic policy in the United States. Possibility of surprises in the normalization of monetary policy in that country. The potential implications of lingering antiglobalization sentiment Banco de México Domestic Challenges The balance of risks for economic activity continues to be tilted downwards, mainly as a result of: Renegotiation of NAFTA. Presidential elections in Potential for new episodes of turbulence in international financial markets. Banco de México Mexican vehicle market perspective Adjustment to a stabilization in the mid-term, with growth of sales similar to that of economic growth: average 2% Prices and rates will continue playing main role in the market, as an indirect impact on consumer income Change on consumer patterns should boost competitiveness among segments

32