MEXICO CITY—For the better part of a decade, Mexico broadcast its status as the new darling of the global auto industry with plant announcements at the presidential residence of Los Pinos, groundbreaking ceremonies attended by top auto executives, and media-packed factory inaugurations full of congratulatory speeches by federal, state and local officials.
Former Mexican President Vicente Fox was on hand for Chrysler's pledge to spend $1 billion at its Toluca plant in 2006; ex-President Felipe Calderon feted Audi executives in 2012 during their announcement of a $1.6 billion facility in the state of Puebla; and successor Enrique Peña Nieto headlined similar events for Kia, Toyota and BMW in 2014 and 2015.
But the arrival of Donald Trump to the U.S. presidency helped by his campaign against the North American Free Trade Agreement and illegal immigration to the U.S.—mostly ended the public celebrations of Mexico's record-breaking auto industry. And now, nearly three years after Trump took office, Mexican auto production, exports and new-vehicle sales are all falling, and the sector has abandoned its goal of producing 5 million cars and light trucks annually by the end of 2020.
While Trump's ascendancy coincided with the downturn in Mexican auto manufacturing, analysts warn against a false correlation, given that the North American auto sector had begun to decline before Trump took office.
"In Mexico, the current wave of automotive investments really stopped in mid-2015," said Bernard Swiecki, assistant director of research at the Center for Automotive Research in Ann Arbor, Mich. "Which, by the way, was before Mexico became such a big player in the U.S. presidential election and before we knew who the candidates were going to be."
And it wasn't just Mexico. North America was coming off record highs.
"Way back in 2015, our own forecast as well as other forecasts that the auto makers were seeing were calling for a softening of the market because it's a cyclical industry," Swiecki said. "There comes a point where the cycle tops off, the industry has added all the capacity it needs, so you stop adding."
The nation's auto exports, estimated to account for 88 percent of production in 2019, fell last year after setting a record high in 2018. Light-vehicle output dropped for the second-straight year to an estimated 3.75 million in 2019, from 3.91 million a year earlier and a record 3.93 million in 2017. And new-vehicle sales declined for 30 straight months to about 1.3 million, from a record 1.6 million in 2016.
Credit to Trump
Some Mexican industry officials even credit Trump with saving the North American trade alliance through the new U.S.-Mexico-Canada Agreement, which has broad political support and is considered an update to its 26-year-old predecessor.
"Trump stopped having this vision of Mexico as the enemy and that NAFTA was the worst trade agreement in the world," said Oscar Albin, president of Mexico's INA auto parts association.
"Trump changed his point of view to say: 'Mexico is not my enemy; Mexico is my partner that makes me competitive,' " Albin said in December.
Even Mexico's leftist president, Andres Manuel Lopez Obrador, has praised bilateral relations with the U.S.—and with Trump in particular—while embracing the USMCA pact. That's no small political risk, given the Mexican public's aversion to Trump for his comments against illegal immigration and pledge to build a wall between the two nations.
While critics blame Trump for economic turbulence in Mexico that helped spark a devaluation of the peso, rising inflation and higher interest rates, few attribute auto industry woes in general to a Trump slump.
"An uptrend can't last forever, and sure enough, we set a new (U.S.) sales record in 2016, and then it came down off of that in 2017, 2018 and 2019," said Swiecki. Mexico sends about 80 percent of its auto exports to the U.S.
The future of the Mexican sector was looking even more bleak in the early months of the Trump administration. One of the darkest days came just before the president-elect took office in 2017, when former Ford CEO Mark Fields canceled a $1.6 billion plant in San Luis Potosi to build a new generation of the Ford Focus sedan.
Fields defended the move as a business decision, but it widely was seen as a nod to Trump, who publicly expressed his gratitude. Other auto makers took note. Not by ending their investments in the Mexican auto industry, but mostly by burying them in Mexico-only press releases—or no press releases—while amplifying every dollar spent in the U.S., past, present and future.