Inflation, NAFTA uncertainty put brakes on Mexico car sales

Global Business

Car sales in Mexico had been cruising along smoothly – until somebody hit the brakes in December.

That’s when domestic auto sales plunged, and the industry’s been searching for reasons why.

Franc Contreras reports from Mexico City.

Automobile sales in Mexico, one of the developing world’s largest markets, broke records during two consecutive years – in 2015 and 2016. But that changed in 2017.

New vehicle sales fell last year nearly 5 percent, compared to 2016. Mexican car industry officials say in the month of December auto sales fell more than 17 percent, making it the worst month for vehicles sales for the entire year.

Mexico’s auto industry cites a number of factors, including rising inflation, which hit nearly seven percent last year its highest level in 17 years.

An executive for Mexico’s automobile distributors association says rising inflation makes it even more difficult for Mexicans to buy new vehicles. But he says Mexican auto exports, mainly to the United States, remain strong.

“Throughout 2017, Mexican auto exports showed a favorable performance, and growth in production that took us to 3.8 million vehicles. Of those, 3.2 million vehicles were exported,” said Guillermo Rosales with the Association of Automotive Distributors of Mexico.

Buyers are also concerned about the prospect that U.S. President Donald Trump will withdraw from the North American Free Trade Agreement.

Other factors affecting domestic car sales include the falling value of the Mexican peso and rising food and fuel prices.

Industry analysts say that another key factor behind the decline of domestic auto sales is the political uncertainty heading toward Mexico’s presidential election, scheduled for July.