Mexico auto dealership closures and job losses in Estado de Mexico, Digi Mart USA News (Toluca, Estado de Mexico): Around 10,000 jobs in the automotive sector in Estado de Mexico could be at risk if more than 120 vehicle sales agencies close due to changes to the Income Tax Law (ISR), according to estimates from the Mexican Association of Car Dealers (AMDA).
AMDA’s state director, Gustavo Guadarrama, said the new rules allow agencies to deduct a maximum of 96.6% of their expenses for tax purposes, even though their profits typically represent between 1% and 3% of sales. He said this could force them to pay taxes higher than their actual earnings would justify.
Guadarrama said dealers earn most of their revenue from selling vehicles, an activity that requires high investment and leaves narrow profit margins. He argued the reform does not account for these operating conditions, saying that many agencies cannot reach profits above 4% and that the business depends more on volume than on profit.
Nationally, AMDA estimates that up to 30% of dealerships could face problems continuing operations, which could affect about 1,000 establishments and 70,000 jobs across Mexico. The organization stressed that this is a projection and not closures that have already taken place.
To address the situation, the state leader said AMDA will seek a decree that would give dealers tax treatment similar to that granted to other sectors. He acknowledged that the restrictions aim to combat tax evasion, but said dealerships have control mechanisms over their commercial operations and that the measures do not fit their business, since about 95% of their expenses go directly to purchasing vehicles from brands.
Guadarrama added that closures could also reduce state revenue, since vehicle sales generate income from vehicle registration procedures and other contributions. AMDA said it will request intervention from President Claudia Sheinbaum Pardo and the Congress of the Union to review the tax treatment of dealers and avoid compromising the continuity of agencies nationwide.
