FDI soars in automotive trade

Foreign direct investment (FDI) inflows to Mexico in the automotive industry soared to $2.144 billion in the five quarters ending March 31, 2025, according to data from the Ministry of Economy.

This capital flowed into the wholesale trade of trucks, cars, and auto parts in a context marked by the entry of several Chinese brands into the Mexican market and by changes in competition and the competitiveness of companies resulting from tariffs imposed on the sector in the United States and other nations.

The cumulative amount for the last five quarters represents 74.1% of the total FDI that Mexico has attracted in this economic subsector since January 2006.

Mexico recorded positive balances in its FDI flows to the automotive trade in each of these quarters, following three consecutive years of negative balances.

FDI inflows reached $1.083 billion in the first quarter of 2025, a record figure that surpasses the entire total for 2024, when inflows reached $1.061 billion.

These two amounts are equivalent to the total FDI inflows to Mexico in the metallic mineral mining sector during the same period, a productive sector that attracted $2.142 billion, comprising gold, silver, lead, copper, zinc, and iron, among others.

Between January and May 2025, 593,284 light vehicles were sold in Mexico, an increase of 0.9% compared to the same period the previous year, according to data from INEGI.

Furthermore, during those five months, Mexico reported retail sales of 22,089 heavy vehicles, a year-over-year drop of 20.9 percent.

Chinese investment draws criticism

Until now, much of the discussion about China's participation in the Mexican market has focused on the growing share of Chinese brands and the incorporation of Chinese inputs, parts, and components into final products exported from Mexico.

According to a 2024 U.S. International Trade Commission (USITC) report, several commentators, including the United Auto Workers (UAW) and the Labor Advisory Committee on Trade Negotiations and Trade Policy (LAC), expressed concern about the volume of Chinese FDI in Mexico's automotive sector, alleging that such investment seeks to evade Sections 232 and 301 tariffs on direct imports from China.

The UAW represents auto workers in the United States and Canada, including automakers, parts suppliers, and other auto-related workers.

The LAC, in turn, includes representatives from local and national unions, which together represent more than 16 million American workers.

Both organizations urged the United States to work closely with Canada and Mexico to carefully examine these Chinese investments and determine whether automotive content entering the North American supply chain is linked to government-backed Chinese companies.

At the same time, Adam Hersh, a senior economist at the Economic Policy Institute, expressed similar concerns, arguing that the concept of “accumulation” in calculating regional value content allows the proportion of non-North American content to increase exponentially as components are transformed in the value chain.

Adam Hersh also argued that this means a significant amount of non-US content benefited from the Inflation Reduction Act (IRA) tax credits.