1. 1 Mexico’s Automotive Sector May 2007 Prepared by: Office of Representation of Mexico’s Secretary of Economy in Japan Mexico-Japan Economic Partnership Agreement Embassy of Mexico Email: comunicatokio@economia.gob.mx, Tel. 3506-6681comunicatokio@economia.gob.mx

2. 2 Mexico’s Automotive Sector Mexico’s automotive industry is one of the country’s most important sectors in terms of FDI, exports, and employment Mexico is one of the top ten global manufacturers of vehicles In 2006, Mexico produced 1,978,771 vehicles During the first four months of 2007, Mexico produced 597,382 automobiles Number of Vehicles Source: Mexican Association of Automotive Industry (AMIA) Mexico’s annual vehicle production

3. 3 Mexico: Among the World’s Top Ten Countries in the Production and Exports of Automobiles FTA European Union CEA – Argentina FTA Chile FTA Nicaragua FTA Costa Rica FTA Bolivia FTA Colombia NAFTA FTA Japan FTA Honduras El Salvador and Guatemala FTA Israel CEA – Brazil FTA Uruguay Automotive products and finished vehicles produced in Mexico are exported to more than 30 countries, including Japan, under preferential market access through Mexico’s FTA network FTA EFTA

4. 4 Mexico’s Automobile Exports Number of Vehicles Source: Mexican Association of Automotive Industry (AMIA) In 2006, Mexico exported 1,536,768 vehicles, a 29.5% increase from the previous year In 2006, Mexico exported 1,536,768 vehicles, a 29.5% increase from the previous year From January to April 2007, Mexico exported 449,338 vehicles From January to April 2007, Mexico exported 449,338 vehicles

5. 5 Mexico’s Autopart Industry The autopart industry in Mexico comprises approximately 350 companies in the Tier 1 category. About two thirds of those companies are foreign owned Mexico needs to expand its manufacturing base in Tier 2 and 3 suppliers. The Mexico- Japan EPA represents an opportunity to Japanese autopart companies in Mexico’s growing automotive manufacturing sector

6. 6 Structure of Mexico’s Auto Parts Industry Tier 2 Tier 1 Tier 3 Assemblers 345 companies (mostly foreign) 14 companies Source: INA (Mexico’s National Industry of Autoparts) 7.0% of Total Manufacturing GDP 8.1% of Total Manufacturing Exports Total Production: 1.677 Billion Dollars (Estimated, 2004) Parts Suppliers Approx. 1,000 companies (About 30% are domestic) Casting Components, Press, Plastic, Aluminum, Logistics, Bearing, Machining, Die Casting & Molding, Machine Tools Air Conditioning, Engine Components, Steering, Suspension, Logistics, Die Casting & Molding, Electronic Components

7. 7 Strengthening of Mexico’s Support Industries Mexico’s Ministry of Economy Fosters the Formation of Supporting Industries in the Auto Parts Sector Strengthening Mexican Small and Medium Enterprises Strengthening Competitiveness of Japanese Companies in Mexico Formation of Mexico-Japan Supply Chain Win-Win Business Opportunities Strategic Alliances between Japanese SME’s and Mexican companies to become suppliers

8. 8 Mexico’s Exports of Autoparts According to the US Department of Commerce, in 2006, Mexico was the US largest supplier of motor vehicle parts In 2006, Mexican exports of motor vehicle parts to the US totaled 21 billion dollars, an increase of 7.4% from a year earlier Motor Vehicle parts imported by the US in 2006 Million USD Source: US Department of Commerce

9. 9 MEXICO TOTAL VEHICLE SALES 2005, 2006 and 2007 PASSENGER VEHICLES 713,379 COMMERCIAL VEHICLES 415,974 20051,129,353 PASSENGER VEHICLES 680,942 COMMERCIAL VEHICLES 455,929 20061,136,871 Source: Mexican Association of Automobile Dealerships (AMDA) PASSENGER VEHICLES 166,486 COMMERCIAL VEHICLES 112,141 January-March 2007 278,627

10. 10 MEXICO TOTAL VEHICLE SALES, EXPORTS AND PRODUCTION 2004, 2005, 2006 and 2007 Source: Mexican Automotive Manufacturers Association (AMIA) SALES Exports Exports Total Production Retail Sales Whole Sales 20041,095,7961,096,7771,094,3061,507,175 20051,131,7681,128,3971,186,3461,606,460 20061,139,7181,160,0371,536,7681,978,771 January-April2007355,235349,605449,338597,382

11. 11 Production of Japanese Car Companies Manufacturing in Mexico HondaNissanToyotaTotal* Total 200624,262408,43933,209465,910 2006- 2005 %3.117n.c.25 January2,13047,120--49,250 February1,91240,7502,33244,994 March2,15042,4675,22649,843 April94237,3011,92240,165 2007 Acum.7,134167,6389,480184,252 Jan-April 06/07 %- 12.930.1- 18.823.8 Source: Mexican Automotive Manufacturers Association (AMIA) * Automobiles In 2006, Japanese car companies were responsible for 24% of Mexico’s total production

12. 12 Retail Sales of Japanese Car Companies in Mexico AcuraHonda Mazda **Mitsubishi Nissan Subaru ** Suzuki **ToyotaTotal* Total 20061,63147,4717,49516,751228,3153084,41360,088366,472 % 2006- 200558.323.9n.c.11.6-2.8n.c. 70.10.7 January1744,1121,1001,47819,261444484,35730,974 February1563,5961,1661,31318,026454044,16628,872 March1244,0971,3561,50018,358404015,80431,680 April1243,4191,15495414,115343294,54924,678 2007 Acum 57815,2244,7765,24569,7601631,52818,876166,204 % Jan-April 06/07 371.6168.91.4- 3.2n.c.24.316.93.9 Source: Mexican Automotive Manufacturers Association (AMIA) * Automobiles ** New entrants in Mexico as a result of the EPA quota system In 2006 Japanese automotive companies sold 366,472 vehicles in Mexico, increasing to 32% their market share in the Mexican car market

13. 13 Exports of Japanese Car Companies Established in Mexico HondaNissanToyotaTotal* Total 200615,107208,82010,111234,038 % 2006-20054.233.5n.c.29.5 January1,15524,734--25,889 February1,14024,6392,33228,111 March1,90227,8905,22635,018 April15018,2941,92220,366 2007 Acum.4,34795,5579,480109,348 % Jan-April 06/07- 14.267.9n.c76.4 Source: Mexican Automotive Manufacturers Association (AMIA) * Automobiles In 2006, Japanese car companies manufacturing in Mexico accounted for 15.2% of the country's automobile exports

14. 14 Mexico-Japan Economic Partnership Agreement The EPA has also contributed to the establishment of four new Japanese companies in Mexico that are now selling vehicles in the domestic market: Mazda, Isuzu, Subaru and Suzuki. In late 2007, Hino motors will start commercialization of trucks in Mexico. For fiscal year 2007 (April 2, 2007 to March 31, 2008) the EPA has allocated a quota of 56,844 vehicles to be imported to Mexico from Japan.

15. 15 Import Quota for Japanese Car Manufacturers (General Tariff will be eliminated in April 2011) Company Unilateral Quota*1 M-J EPA Quota Total*2 200520062005200620052006 Established in Mexico 58,21865,30546,59945,270104,817110,575 Nissan27,21829,30523,71823,02950,93652,334 Honda5,0009,0008,9008,65213,90017,652 Toyota16,00017,0006,6646,48722,66423,487 Mitsubishi*310,00010,0007,3177,10217,31717,102 Newly Entered in Mexico 008,24011,3158,24011,315 Mazda003,3405,5023405,502 Suzuki003,0004,0923,0004,092 Isuzu001,9001,2211,9001,221 Subaru0005000500 Unused Quota 000000 Total58,21865,30554,83956,585121,297121,890 (Unit: vehicles) *1) Car manufacturers that produce in Mexico are given quotas for units equivalent to 10% of its annual production *2) EPA quotas are given for units equivalent to 5% of the total sales in the previous year *3) Mitsubishi uses quotas allocated to Daimler Chrysler Source: Mexico’s Secretary of Economy