By Michael Martinez, Crain News Service
DETROIT — Forecasting firm LMC Automotive Ltd. expects vehicle makers will continue to invest in Mexico over the next four years despite tariff threats and social media shaming from U.S. President Donald Trump.
The study, released Jan. 18, said production south of the border for Detroit's three auto makers will increase through 2020, while production in both Canada and the U.S. is expected to fall.
The firm said the percentage of Mexico-built vehicles sold in the U.S. is predicted to rise, too, according to the study, as capacity investment in Mexico will grow at a much faster rate than in the U.S.
“The U.S. currently accounts for two-thirds of North American vehicle production, but significant investment plans and decisions to re-source capacity from Asia and Europe to Mexico are expected to bring Mexican production from 19 percent of NAFTA (North American Free Trade Agreement) today to 26 percent in 2020,” the study said.
Despite its projections, LMC acknowledged Mr. Trump's policies could impact future decisions.
“The potential for penalty on vehicles manufactured within NAFTA but outside the U.S. may impact existing vehicle sourcing and future [North America] production mix and vehicle decisions, many of which are already in process,” the study noted.
“Until specific policy is detailed, the environment is fluid and uncertainty remains high, as the industry plans for the future,” it continued. “Aversion to policy risk, and to the threat of negative publicity, has become a significant consideration for planners.”
LMC expects overall U.S. vehicle sales to plateau around the 17.5 million mark through the end of the decade, and as a result, it said the number of vehicles sourced within North America will increase. More than 50 percent of that increase is expected to be in Mexico.
Detroit 3 projections
Among the Detroit 3, Ford Motor Co.'s Mexico production will increase the most — to 757,000 vehicles in 2020 from 387,000 this year — over the next four years, thanks in large part to shifting production of the Focus compact sedan from its Michigan Assembly Plant to Hermosillo, LMC predicted.
General Motors Co.'s Mexico production is expected to grow to 866,000 from 717,000 today, while Fiat Chrysler Automobiles (FCA) L.L.C.'s is expected to grow to 460,000, up slightly from its current output of 438,000.
Over that same period, Ford's U.S. production is expected to fall slightly, to 2.24 million from nearly 2.4 million. GM's will dip to 2.3 million from 2.4 million, while FCA's will drop to 1.48 million from 1.54 million.