Interview: Alexander W Wehr
What should be the long-term vision of international auto players present in Mexico?
ALEXANDER W WEHR: As goes the phrase, production follows the market, and Mexico is strategic for both. Mexico’s advantages are numerous: geographic location, a high-quality labour force, quality existing infrastructure, low Customs duties and a well-developed supplier network. States like San Luis Potosí are attracting a huge amount of interest from carmakers all over the world because of these factors. The automotive sector represents under 5% of Mexico’s GDP but 15% of direct investment belongs to the industry, implying there is room to grow in terms of added value. It is important for international carmakers producing in the country to go beyond their plant activity and have a wider vision, using their home country’s expertise to invest in education training to build knowledge, efficiency and capacity throughout the entire production chain.
What conditions are necessary for Mexico to reach its full sales potential?
WEHR: Latin America has huge potential for car sales, with Mexico being the leading market in the region. Comparing car prices in Mexico to those in the US, Canada or even China, the difference is vast. It’s difficult to find another market in the world where cars are so comparatively inexpensive due to low Customs duties and taxes from the numerous free trade agreements Mexico has with major markets.
In addition, increased purchasing power from the growing middle class implies that the young demographic segment and their openness to new technology have a bright future. Clearly, there are still challenges that need to be addressed: currency volatility and crime rates remain a problem throughout Latin America, and the upcoming 2018 elections in Mexico bring some uncertainty to the investment environment. For a market to mature, a growing middle class with increased spending power combined with a strong political environment, a decreasing crime rate and a rise in the overall well-being of a population are the most important factors in boosting consumer confidence. This is particularly true of the premium segment, which has the most potential to grow at a global level. Whereas more than 30% of cars are considered premium in Germany, this figure is around 3% in Mexico, which shows huge potential for growth.
How are public and private sector actors developing the electric car market in Mexico?
WEHR: Mexico has significant potential for electric vehicles, and what would help boost the market are tax incentives for the consumer. Electricity-based transport is the future, and it needs to be rewarded financially by the government, especially given the benefits it could bring to cities in terms of air quality and traffic improvement. If you want innovation to spread and be a pioneer, it’s not only the manufacturer that can make it happen; it takes cooperation within the industry, support from government and public authorities, and ultimately, there has to be a final customer who is interested. For instance, at the start of 2016 BMW teamed up with Nissan in order to expand infrastructure for electric cars, and by the end of 2017 we should have over 200 charging stations across the country. These now need incentives and infrastructure from the government. Look at Oslo, Norway: a city where electric cars make up 30% of the market. That is the result of financial support to incentivise sales to toll-free lanes, free recharging points and free parking in the city, all of which could easily be implemented in cities all over Mexico. The policy exists, but it takes the participation of all those involved to make it work. Mexico is one of the most advanced Latin American countries when it comes to an ecological appetite and green consumers. The government and other industry players are well educated in this regard, so there is real potential for this segment to grow over the medium and long term.
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