Mexico’s auto industry faces formidable challenges

Significance

Even after these challenges have passed, other factors will hinder the industry's recovery. The sector accounts for 3.8% of GDP and employs nearly 1 million people, and its decline would have a major economic impact: any loss of investment or fall in production would harm growth and employment prospects.

Impacts

• The adoption of more advanced technologies, requiring training that many Mexican workers lack, will erode the country’s low-wage advantage.
• US efforts to combat climate change may cause more clashes with Mexico, on top of those caused by proposed electric vehicle tax credits.
• New fuel efficiency rules for vehicles sold in the United States from 2023 could pose further challenges for Mexican manufacturers.