Foreign Direct Investment in Latin America and the Caribbean 2017

Foreign Direct Investment in Latin America and the Caribbean • 2017
Executive summary
17
Diagram 1
Automotive industry: technology embedding
Mechanization:
Mechanical devices
replace manual actions
Electrification:
Technological
improvement of
car parts
Electric windows
Power door locks
Digitization:
Introduction of embedded
digital components
Radio data system
technology
Parking cameras
Working parts sensors
Connectivity:
Interconnection of digital
components
Embedded in-car
connectivity
Monitoring real-time car
operating data
Autonomization:
Incorporation of smart
hardware and software
Autonomous driving
Automatic self-diagnosis
systems
Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of Statista, Digital Market Outlook. Connected Car Market Report, New York,
March 2017.
In short, the automotive industry is experiencing the greatest revolution in its history:
its frontiers are expanding and new products and business models are emerging. The
convergence between traditional manufacturing and software is shifting the structure
of the production chain and the leaderships within it. Although great expectations
surround the new forms of mobility and the role of the automotive industry in it, many
questions remain to be answered in this regard.
C. The automotive industry in Mexico:
a success story under pressure
Although North America remains one of the three main hubs of the global industry, it
has lost ground over the past few decades. Among the member countries of the North
American Free Trade Agreement (NAFTA), however, Mexico has gained in stature: by
virtue of intensive investment, it has become one of the leading suppliers to the United
States, the world’s second largest motor vehicle market (see figure 4).
The Mexican automotive industry now contributes over 3% of the country’s GDP and
18% of its manufacturing output. It runs a yearly trade surplus of US$ 52 billion, represents
over US$ 51.2 billion in cumulative FDI inflows between 1999 and 2016 (11% of the total)
and employs 900,000 workers directly. Today, 80% of Mexico’s motor vehicle production
is exported and 86% of these exports go to Canada and the United States. Mexico has
thus become the world’s seventh largest supplier and the fourth largest exporter.
This process has gathered pace over the past few years, especially since the international
financial crisis, and in the process Mexico has gone from being a low-cost platform for
mass-market vehicle assembly to an integrated production chain that is more diversified
in terms of products and technological sophistication. This is leading Mexico to develop a
denser and higher-tech productive fabric, which should strengthen its position in an industry
that is under heavy pressure from the new —and potentially highly destabilizing— trends.