Automotive investments in Mexico, USA News (Mexico City): The Ministry of Economy has opened a new pathway to attract automotive investments to Mexico. Through a temporary 10% tariff exemption on the import of component kits used to assemble vehicles, the government aims to encourage automakers to establish new production lines within the country. This measure arrives for an industry that has not recorded announcements for new light-vehicle plants since 2015, when Toyota announced its factory in Guanajuato.
The decree, published on October 13, enables manufacturers that meet specific requirements to import components for assembling automobiles under Semi Knocked Down (SKD) and Completely Knocked Down (CKD) schemes. The Ministry of Economy justifies the change due to international trade restrictions, which the agency states force a rethinking of production models to maintain the global competitiveness of the established Mexican automotive industry.
History of SKD and CKD Schemes in Mexico
Assembling vehicles under these schemes is not entirely new in Mexico. Eric Ramírez, director of the consultancy Urban Science, explains that Mexico utilized both schemes in the first half of the past century before establishing requirements to develop the domestic auto parts industry in 1962.
At that time, President Adolfo López Mateos published Mexico’s First Automotive Decree, setting requirements to boost local component manufacturing, prohibiting the importation of kits for assembly, and demanding that at least 60% of parts be developed domestically.
| Period / Policy | Key Requirement |
|---|---|
| Pre-1962 | Importation and assembly of SKD and CKD kits without strict domestic content rules. |
| 1962 Decree (López Mateos) | Prohibited motor and mechanical assembly imports, requiring at least 60% national manufacturing cost. |
| USMCA Era | Shifted focus from national content to regional content across Mexico, US, and Canada. |
Subsequent trade agreements shifted the focus to regional content across North America, allowing the creation of a supplier network spanning Tier 3, Tier 2, and Tier 1 suppliers. This model generated a network of over 2,000 auto parts plants supporting 880,000 jobs. With imported kits, however, a significant portion of industrial work takes place outside the country.
Current Regulations and Eligible Manufacturers
The benefit is limited to the 11 light-vehicle manufacturers with production facilities in Mexico: BMW, Stellantis, Honda, Mazda, Nissan, Toyota, Kia, Ford, General Motors, Volkswagen, and Giant Motors Latinoamérica. These companies can import kits from countries without free trade agreements, such as China, subject to authorization, permits from the Ministry of Economy, and controls by the Tax Administration Service and the National Customs Agency of Mexico.
Giant Motors Latinoamérica currently uses the SKD scheme to assemble JAC vehicles in Hidalgo, while General Motors will incorporate the model to assemble the Aveo and Groove in Ramos Arizpe, Coahuila, starting production in 2027.
