The Mexican automotive market grew by 19% in 2016, achieving total sales of 1.3 million vehicles. It was the latest in a long series of annual increases, in lockstep with overall GDP growth (+2.6% in 2016).
However, some observers fear the incoming Trump administration in the U.S., with its anti-Mexican rhetoric and protectionist instincts, could harm Mexico's economy – strongly interwoven with the U.S. economy via NAFTA – which could have a knock-on effect on automotive sales in 2017 and beyond.
The True Fleet market in Mexico is about 20% of the overall market, a figure close to the American average. True Fleet sales are predicted to grow to 265,000 units in 2017. The bulk of True Fleets are linked to large accounts. Outright purchase still accounts for 74% of company car acquisitions.
The main brands on the Mexican market are Nissan, Chevrolet and Volkswagen, in that order. Kia is making great strides. Many OEMs have dedicated fleet teams. Some networks could be better organised.
The best-selling vehicle in 2016 was the Nissan Versa, a subcompact. Fastest riser was the Chevrolet Spark, a city car. Subcompacts and city cars are the most popular segments, although pick-ups are also doing very well (Nissan's range, for instance). LCVs represent 16% of the overall market.
Swing to leasing
Specifically for the fleet sector, the most popular segments are small cars from the B (38%) and C (14%) segments, and pickups from the D-segment, in that order. However, sales volumes in those segments have decreased, to the advantage of E-segment pickups and B-segment SUVs.
Ownership still is king in Mexico, but the last five years have seen a significant swing towards full-service leasing, as the advantages became apparent, and both corporates and government agencies are actively seeking to concentrate on their core business.
Mexico’s interest and tax rates are very favourable to leasing. Mexican fleet operators can choose between two distinct fleet leasing products: the ‘American’ open-end leases, and the ‘European’ closed-end leases. The former are cheaper and more popular than the latter. However, most medium and large companies still prefer purchasing – a reflection of their wariness of interest rate risk.
The main players on the Mexican fleet and lease market are big multinationals, mainly ALD, Element and LeasePlan, which all offer products tailored to the peculiarities and complexities of the Mexican fleet market, which is characterised by a high degree of fleet management (30%-40%).
Residual values are generally very low in Mexico. In the absence of a formal used-vehicle market, up to 95% of end-of-lease cars are usually sold back to the driver, even at extreme bargain prices – there is no tax on the advantage gained by selling the vehicle under the market price.
Mexico City (pictured) suffers from serious congestion and emission issues. On days with heavy air pollution, certain types of cars are not allowed on the road – sometimes for three to four days on end. This may push fleets toward accelerated adoption of hybrid and/or electric cars, which as yet are almost nonexistent in Mexico.
Image: Ralf Roletschek, GFDL 1.2
| 01/03/2017 | Frank Jacobs