Mexico limits auto parts tariff break to established local carmakers

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Mexico limits auto parts tariff break

Highlights

Mexico's economy ministry clarified that only automakers with existing productive installations in Mexico qualify for the new five-year, zero-tariff auto parts import scheme.
The exemption applies to 11 established manufacturers, with industry data pointing to Audi, BMW, Ford, General Motors, Honda, Kia, Mazda, Nissan, Stellantis, Toyota, and Volkswagen.
The measure excludes newcomers such as GAC and JAC, supporting local production amid Chinese-brand vehicle sales surging nearly 30% in Mexico during the first half of the year.

Eligibility rules for five-year tariff exemption

As reported by Reuters, Mexico's economy ministry said on Friday that the new scheme applies only to companies with "productive installations" in Mexico and that meet other specific criteria.

The clarification follows questions raised after a decree published on Tuesday cut the import tariff to zero from 10% for certain assembly parts, including semi-knocked-down, SKD, and completely knocked-down, CKD, kits. Analysts cited in local media had suggested the measure could open the door for Chinese automakers such as GAC and JAC, or other newcomer vehicle makers, to benefit.

The ministry said 11 carmakers are eligible under the program, although it did not identify them by name. Industry data reviewed by Reuters points to Audi, BMW, Ford, General Motors, Honda, Kia, Mazda, Nissan, Stellantis, Toyota and Volkswagen as the likely qualifying manufacturers.

Implications for Mexico's auto market

The restriction keeps the incentive focused on companies that already manufacture in Mexico, rather than extending the tariff relief to brands seeking to enter the market through imported assembly kits. That approach may ease concerns that the decree would weaken barriers designed to manage competition from lower-cost Asian vehicle imports.

Chinese-brand vehicle sales in Mexico jumped nearly 30% in the first six months of the year despite steep tariffs intended to slow the rise of Asian imports. By limiting the exemption to established producers, the government is signaling support for local production while maintaining tighter conditions for newcomers.

In our earlier article on BYD Malaysia’s CKD local assembly plan, we covered the company’s move to appoint Inokom Corporation Sdn Bhd as its partner for completely knocked-down vehicle operations in Kulim. We also noted that BYD had dropped its earlier idea of building a new plant in Tanjung Malim after export-related requirements, leaving key details such as models and production timelines still unconfirmed.

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