Why Covid-19-hit Mexico is crucial for US auto industry's struggle to recover

Mexico is gearing up to lift restrictions in several municipalities which have not reported Covid-19 cases. This could allow automotive component manu
The US is Mexico's biggest trading partner and several American automakers need components manufactured in the country for their assembly lines. (AFP)
The US is Mexico's biggest trading partner and several American automakers need components manufactured in the country for their assembly lines.

Mexico continues to reel under the threat from Covid-19 pandemic with as many as 353 deaths on Tuesday, the highest in a single day in the country. And yet, authorities here have reportedly paved the way for the auto industry to resume work, raising eyebrows. The underlying reason for such a move could be mounting pressure from the neighbouring country to the north that significantly depends on Mexico for automotive components.

Several US automakers of repute make use of components manufactured in Mexico to assemble their vehicle units. Reuters has reported that Mexican auto outputs in the month of April came crashing down by 99% and while this quite obviously wrecked havoc in the domestic industry, it also extracted a massive toll on American vehicle brands struggling with its supply chains.

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Now, Mexico is all set to bring in a change and has reportedly allowed municipalities without reported coronavirus cases which lie adjacent to others to lift restrictions. This would allow for manufacturing units, including those in the business of manufacturing and exporting auto components, to possibly open up - a big sigh of relief for US automakers. "We now have the light which tells us we're going to get out of the tunnel," President Andres Manuel Lopez Obrador was quoted as saying. (Full report here)

To throw open such facilities at a time when the health crisis is hardly over is leading many to question if Mexico is under some form of duress from the US. The country certainly has its own economic reasons and stands to benefit from restarting work but some say that lifting restrictions now could defeat the purpose of having had such restrictions.

And yet, production could begin in municipalities given the go-ahead in a gradual manner. The coming weeks would hardly allow for facilities to ramp up levels to pre-Covid-19 times. The resumption, nonetheless, would come as a shot in the arm for US firms that depend on components from Mexico.

First Published Date: 14 May 2020, 09:04 AM IST

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