Why Mexican auto lobby is 'up in arms' amid lockdown woes

Mexican auto industry group AMIA said on Monday that 90 days is not enough time for the sector to adapt its supply chains to meet the rules of origin requirements in the United States-Mexico-Canada Agreement, which could take effect on July 1.

AMIA has urged authorities to postpone until January 2021 the start of the sectoral rules in the trade pact that will replace the North American Free Trade Agreement.

It argued that there is still a lack of clarity about the content rules and said the coronavirus has made it even more challenging to comply.

"By July we could already be seeing the implementation (of USMCA), which for us is a difficult situation," said Fausto Cuevas, AMIA director, adding that the new rules in the treaty will require "very important" changes in the supply chain.

Canada and Mexico recently said they have completed their internal legal processes for the treaty to go into force, but the United States must still follow suit.

The Mexican economy ministry has told the industry the USMCA allows for an alternative transition scheme that could give some companies more time to comply, but the exceptions would have to be requested individually, Cuevas said.

A PAINFUL MARCH

In March alone, vehicle production fell by almost 25% in Mexico, while exports declined 12% from the same month last year, according to the INEGI statistics institute.

Industry experts expect production to fall throughout the year due to the disruption of the coronavirus. AMIA did not provide a forecast.

Since mid-March, various automotive brands have been forced to suspend their operations to try to contain the outbreak.

Mexico's AMDA auto distributors association said on Monday that it expects sales of all new vehicles made in the country to drop by at least 25.5% in 2020, to about 982,000 vehicles, on par with sales during the 2009 financial crisis.