GM squeaks by pre-pandemic levels, Mexico disputes RoO requirements — Panjiva

Supply Chain Research

GM squeaks by pre-pandemic levels, Mexico disputes RoO requirements

Cons. Discr. - Autos 1183 Mexico 885 U.S. 5322 USMCA 456

The Mexican government has launched a formal dispute under USMCA rules regarding U.S. attempts to apply allegedly stricter-than-anticipated rules of origin for cars and light trucks. That starts a 75-day discussion process. USMCA rules have already successfully resolved a previous disagreement over labor rules implementation as discussed in Panjiva’s  research of July 12, though this dispute looks more fundamental.

Panjiva’s Mexican export data shows that exports of cars to the U.S. has increased by 117.8% year over year in Q2 and 30.1% year over year in July. This shows how the industry has recovered from the pandemic, but hides the fact the exports are substantially below 2019 levels, by 10.1% and 14.5% year over year in Q2 and July respectively. This is a result of the supply shortages plaguing the industry, with companies like Toyota and Mazda recently announcing factory shutdowns.

The fight over rules of origin requirements could be grounded in a fear that exports could fail to reach prior levels, especially in passenger cars. Passenger cars represented $31.7 billion dollars in exports in 2020, and July saw exports fall by 37.9% against July 2019. Exports of tractors and parts are also below 2019 levels by 18.4% and 4.0% respectively. Only exports of cargo vehicles are higher, up 15.2% in July against 2019.

Passenger cars still down after pandemic

Chart shows exports of vehicles to the U.S. on a three month average basis. Source: Panjiva

Panjiva data on U.S. automotive companies shows that General Motors is the only company to show increased exports over 2019 in July, up 2.8%. Other firms manufacturing in Mexico fell, with Nissan down 21.6%, Stellantis down 37.9%, Ford down 42.5%, and Volkswagen down 60.2% in the same period. Mexico will likely continue to resist any changes that make it more difficult to nearshore automotive production in the country, but may be relieved if manufacturing rises to match the strong demand seen in the U.S.

GM skids by 2019 levels

Chart shows exports from Mexico to the U.S. of vehicles on a monthly basis against 2019 levels. Source: Panjiva

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