A rumor that came to be in the press has been confirmed. Rupert Stadler, Executive Director of Audi stated that, “Mexico, recognized for the manufacture of automobiles, offers excellent economic conditions for an Audi manufacturing plant.” The decision to open a new plant in Mexico is designed to promote the growth of the automotive group in North America. While the location of the plant has not been decided, this decision will take into account the characteristics of the land or its logistical connections, as well as the availability of qualified personnel, education centers, and universities. Audi, which belongs to the Volkswagen group, decided to open a plant in Mexico after months of analysis. The decision was taken in place of the proposal to construct a plant at a location close to the Volkswagen plant in Chattanooga, Tennessee where the Passat is manufactured. The decision to construct a new plant in Mexico was due, among other factors, to the free trade agreements that Mexico has with various countries or groups of countries, with the European Union, and Mexico’s competitive costs, the tax regime, and government incentives. As a result of the previous advantages, Mexico solidifies its role as the major North American center for manufacturing lightweight vehicles. Audi joins Mazda Motor Co., Honda Motor Co., Ford Motor Co. and Nissan which have also decided to significantly amplify their facilities and operations in Mexico. According to Automotive News Data Center, the production of lightweight automobiles increased 13% in Mexico in 2011 reaching 2.6 million units. Mexico’s share of total North American production reached 19.5%. Tony Faria, Assistant Director of the Office of Automotive and Vehicle Research at the University of Windsor in Ontario stated that the productivity and quality of products from Mexican plants is the same as that of products from the United States and Canada. Automotive News believes that the new Audi plant in North America is crucial for Volkswagen’s plans to surpass General Motors as the largest automotive manufacturer in the world. Audi expects to sell 10 million units globally by 2018 based on the 8.3 million sold in 2011. Consulting firm KPMG, which had assumed that Audi would establish a plant in Mexico, indicated that Mexico has solidified itself as one of the five main exporters of vehicles. Audi’s announcement joins that of Ford, which has announced a US $1.3 billon dollar investment to enlarge the facilities of its Hermosillo plant for the manufacture of hybrid and electric autos for its Fusion model.

JAC Motors is preparing for the opening of its lightweight truck assembly plant in Culiacan, Sinaloa. The corporate name of this manufacturer is Anhui Jianghuai Automobile Co. The company was founded in 1964. Its range of products includes automobiles, SUVs, minivans, vans, and trucks. The JAC Motors plant in Culiacan began construction during the second quarter of 2011 and according to the manufacturer, is practically ready to begin production. The plant is 6,700 square meters and upon opening will employ 15 people. It is expected that monthly production will reach 60 units. The trucks manufactured in Mexico will be “Knock Down” units, meaning vehicles that are attached to “kits” or semi-assembled sets that only require minor assembly at the final plant. A spokesman for JAC Motors informed that the trucks will be sent by boat via the Pacific Ocean from China to Mexico. The models will be the JAC HFC1061 with a gross weight between 6 and 8 tons and the JAC HFC1083 with a gross weight between 8 and 11 tons. These models have 3.8 liter Cummins diesel engines, ZF manual transmissions and standard ABS brakes. They have “Cab Over” cabins or “short” cabins over the power train for a better use of space.

After the reappearance of the Fiat 500 (Chinquecento) in its retro version in Mexico and then following in the United States, the Abarth sports model will be launched in the upcoming weeks.This brand was founded by Karl Abarth, who achieved thousands of racing victories, 10 world records and 133 international titles. Abarth was head of the automobile design company that achieved global fame. This model has appeared in Europe, but the North American model will be more powerful. The Fiat 500 Abarth that will be sold in Mexico, the United States and Canada has a 1.4 liter turbo engine with 160 horsepower. The standard European version has 135 horsepower, which can increase to 160 horsepower with the optional “SSS” kit. The 500 Abarth engine underwent various improvements and modifications for its sale in North America, the most important being the inclusion of MultiJet technology that provides variable operating intake valves. Furthermore, the 500 Abarth engine sold in Mexico and the United States differs from the European version, as it will have positive crankcase ventilation that increases fuel efficiency. It has a Honeywell turbocharger which provides a boost of 18 PSI and a double intercooler system. In addition, it has pistons with oil sprays and a forged crankshaft in addition to an oil cooler. It accelerates from 0 to 96 km/h (60 MPH) in 7.2 seconds and reaches a maximum velocity of 206 km/h. Fuel efficiency is 11.83 km/l in the city and 14.37 km/l on the highway. Power output is 160 horsepower at 5500 rpm and torque is 150 lb-ft, but upon selecting the manual mode, it increases to 170 lb-ft. It has a 5-speed manual transmission reinforced internally for increased levels of engine torque compared to the conventional 500. The suspension was modified and is 40% stronger than that of the conventional 500, in addition to being five centimeters shorter. It has Koni shock absorbers and a stabilizing bar on the back. For improved driving, this version includes 16” Pirelli Cinturato P7 tires, standard, but 17” PZero Nero tires are offered on an optional basis. The brakes have larger discs and steering is 10% quicker with a 151:1 ratio. The exterior features a new front bumper with air intakes for the two intercoolers. Another important difference may be found at the front of the car as the Abarth scorpion logo replaces the Fiat logo and is also found on the rear of the car, the sides and behind the doors. In addition, this version has side skirts, a rear spoiler above the trunk cover and an aerodynamic diffuser, as well as dual exhaust outlets on the rear bumper. The interior has a sports steering wheel with a flat bottom, front sports seats with increased lateral support and an additional indicator for turbo boost pressure included on the gear shift. The pedals are made of aluminum and red stitching is used to finish the interior design. Furthermore, the instruments are covered in leather. It is expected that the price of the Fiat 500 Abarth will be less than $28,000 dollars.The Mexican version will have a power sunroof.

A problem similar to that faced by Mexico and Brazil is the one that may arise between Mexico and Argentina. Mexico, as is the case with other countries exporting to Argentina, increasingly faces more restrictions with respect to the entry of its products in a trend dating to the global crisis of 2008. Mexico faces problems selling automobiles and auto parts to Argentina. For example, Nissan was supposed to import wine from Argentina in 2011 in order to introduce Mexican vehicles to that country in accordance with an informal rule imposed by the administration of President Cristina Fernandez, requiring importers to restore their trade balances. To that effect, at the end of March, Debora Giorgi, Minister of Industry of Argentina stated to the press that Argentina was going to communicate to Mexico the need to restructure the agreement on the trade of vehicles. “As it stands, the agreement is not beneficial for Argentina and should be reconsidered to quickly achieve balance,” said the Minister of Industry. In 2011, Mexico sold vehicles and auto parts to Argentina worth 759 million Euros and imported 232 million units. Bruno Ferrari, Mexico’s Secretary of the Economy, clarified that Argentina will not be treated the same as Brazil. A few days later, Mexico joined Panama and 38 other countries, including the United States and the countries of the European Union in a formal complaint before the World Trade Organization regarding the difficulties of exporting products to Argentina. Ferrari indicated that such complaint may be the basis for filing a claim against Buenos Aires, a step toward the formation of a dispute resolution panel in the world trade governing body. Unlike Peru, Colombia and Chile, which only verbally joined the complaint, Mexico formalized it. Ferrari explained that Mexico took this decision because Argentina’s intentions to revise the automotive agreement had become the straw that broke the camel’s back. Argentina is the second largest South American market for Mexico. Mexican exports grew 327% between 2007 and 2011. Mexico’s Secretary of the Economy rejected any possibility for a renegotiation with Argentina and reiterated that in the unlikely event that this occurs, Mexico will report this to the World Trade Organization.

In February, the Brazilian government expressed its intent to unilaterally renegotiate or abandon the trade agreement entered into with Mexico.The argument is that the deficit in Brazil’s trade balance with Mexico with respect to the automotive sector endangers Brazil’s automotive industry. As a result, Brazil requested a considerable decrease in the quantity of Mexican auto exports. The Secretary of the Economy announced the Mexican government’s position in four main points: (1) The two countries will maintain the provisions of the ACE 55 agreement, with its exhibits and Appendix II in effect, which agreement establishes the provisions applicable to automotive sector trade between the two countries. Mexico and Brazil signed a protocol calling for import quotas for lightweight vehicles until 2015. Both countries agreed to a reciprocal duty free agreement only with respect to the annual import quotas for three years; (2) An aggregate import quota was established to import new lightweight vehicles from Brazil on a duty free basis until March 18, 2015; (3) Customs preferences were established for goods imported into Mexico as of March 2012. Mexico agreed to apply a 0% ad-valorem tariff to imports of lightweight vehicles from Brazil until March 18, 2015; and (4) The quota and allocation mechanism was established for the exportation of new lightweight vehicles to Brazil through April 8, 2012. The limit imposed by Brazil on automotive imports from Mexico will complicate matters for major assembly plants, which will be forced to modify their production goals for this year. Jose Muñoz, President of Nissan Mexico, stated, “Unfortunately, we had already purchased parts and carried out preparations to be able to export 95,000 units. This means that we will not be able to carry out our plan for 2012”.Nissan exports to Brazil were at an historic level with 45,000 units totaling 32% of all exports of lightweight vehicles from Mexico. In order to compensate, Muñoz stated that Nissan will have to find a way to increase its exports throughout the year to the 100 countries it exports to from Mexico. German manufacturer Volkswagen was also affected by this decision. Thomas Karig, Vice-President of Corporate Relations for VW stated to Reuters that the restriction on free trade is lamentable. Just like its comptetitor Nissan, VW predicts that it will be necessary to reallocate production capacities to other markets.VW manufactures the popular New Beetle in Mexico, which holds promise to be a commercial success.

MexicanAutomotive has occasionally published information on the Mexican market for motorcycles.Data from the Mexican Automotive Industry Association (AMIA) confirms our previous reports on the continued strength of this market. Motorcycles are experiencing market demand in Mexico due to various reasons such as heavy traffic in large cities, versatility of motorcycles for semi-urban and rural zones, low cost, and their sporting potential in a country with a long tradition of motorcycle riding. It should be noted that famous revolutionary leader Pancho Villa rode the legendary Indian motorcycles that were manufactured in the United States at the beginning of the last century and used them strategically as part of his military campaigns. The growth of the market in 2011 has persisted through 2012. In February, 40,824 units were sold totaling 80,943 units sold so far this year. Companies associated with AMIA placed 9,781 units on the market. The sale of brands associated with AMIA reached 20,082 units sold. The data on motorcycles sold show a growth of 37.66% compared to the same period last year.The importation of finished motorcycles experienced growth of 113.5%.