Doing Business in Mexico

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Advanced Electronic Signature to subscribe to this program. Benefits: 1. To enrol in this program it is necessary to present an export project (without a maquila.

Doing Business in Mexico Automotive Industry

Contents I. Business environment in the automotive industry 1.1. Macroeconomic environment: 1.1.1. The impact of economic variables in the industry. 1.1.2. Technologic changes. 1.2. Industrial parks in the country, generic and specialized by type of auto-parts. 1.3. Strategic logistic access to the parks (air, ground, rail transportation). II. Foreign investment and foreign trade in the automotive industry 2.1 Foreign investment 2.1.1. Tax compliance 2.1.2. Tax incentives Tax incentives generated by expenses and investments in technologic research and development activities. Immediate deduction of new fixed assets. 2.2. Foreign trade 2.2.1. Temporary import program for the production of exportable goods (PITEX). 2.2.2. Maquila program 2.2.3. Program for companies with high export rates (ALTEX) 2.2.4. Sectorial promotion programs (PPS) 2.2.5. Law to promote manufacturing, maquila and export services companies (DIMEX). 2.3. Bonded warehouse 2.4. Drawback III. Automotive industry financing 3.1 Financing for assemblers 3.2 Financing for distributors 3.3. Financing for suppliers (auto-parts) 3.4. Financing for consumers IV. The regulatory environment of the automotive industry 4.1. Environmental and ecologic aspects 4.1.1. Environmental impact 4.1.2. Atmospheric emissions 4.1.3. Wastewater disposal 4.1.4. Wastes 4.1.5. Dangerous substances 4.1.6. Noise, light and caloric energy V. Analysis of the automotive industry 5.1. Overview 5.1.2. Recent progress 5.1.3. Production 5.1.4. Sales 5.1.5. Foreign trade

5.2. Competitive environment 5.2.1. Competitors 5.2.2. Concentration of competitors 5.2.3. Other indicators 5.3. Perspectives 5.3.1. Main potential changes for the industry 5.3.2. Market growth perspectives VI. Main PwC business solutions for the automotive industry 6.1. Services 6.2. Main challenges of the automotive industry in Mexico and PwC solutions 6.2.1 Costs reduction 6.2.2 Consolidation of the automotive industry through mergers, acquisitions or disinvestments 6.2.3 Emerging markets 6.2.4 Excessive overhead costs, production capacity, inventories and other pressures on the margins 6.2.5 Improvement of the supply chain 6.2.6 Distributors and franchisees 6.2.7 Regulatory environment 6.2.8 Sustainability and environment

I. Business environment in the automotive industry 1.1. Macroeconomic environment

1.1.2. Technologic changes

Currently Mexico is the eleventh most important country in vehicles production, and it is expected to become the fifth country with the highest volume of units assembled by 2010. Some of its competitive advantages are: the United States and Canada are the main buyers of vehicles and auto-parts produced in Mexico; Mexican labour allows flexible processes, from simple to highly-qualified, maintaining competitive costs; we have increased technologic development and improvement levels, and evidently Mexico is an attractive country for foreign investment in the automotive industry. During the first quarter of 2006 vehicles production increased to more than one million units, an unprecedented figure in a six-month period.

Mexico’s labour includes highly qualified tasks as well as basic activities at very competitive costs, compared to other emerging economies. Mexico has world-class technical universities, as well as training and educational centres that promote research, development and technologic improvement activities.

1.1.1. The Impact of economic variables in the industry

1.3. Strategic logistic access to the parks (air, ground and rail transportation).

In Mexico the automotive industry is the third most important activity, after oil extraction and the maquila industry.

Mexico has seaports with routes to the east and the west, which favours vehicles and auto-parts imports and exports into the Asia-Pacific region, Europe and the rest of North America.






Inflation rate



Main interest rate (Cetes - 28 days)



Exchange rate

10.64 pesos per 1 US dollar

11.15 pesos per 1 US dollar

1.2. Industrial parks, generic and specialized by type of auto-parts. The industrial parks include vehicle-assembly plants and are designed to operate “in the nick of time”. Some of the most important industrial parks are located in Aguascalientes, Sonora, Chihuahua, Saltillo, Guanajuato, Jalisco, Morelos and Puebla.

The fact that the northern states of the country: Baja California, Sonora, Chihuahua, Saltillo, and Nuevo León share the border with the southern territory of the USA, simplifies the processes and reduces logistic costs. There are enough railroads and highways to transport vehicles and auto-parts to all the production centres of the country.

(Annual accrued figures up to December 31st)

II. Foreign investment and foreign trade in the automotive industry 2.1. Foreign investment According to the Mexican legislation there are six types of trading corporations. Following you will find the most common ones: Stock Company (S.A); Limited Liability Company (S. de R.L.); Silent Partnership; JointStock Company; Cooperative Company and General Partnership. Based on our experience, in Mexico foreign investors usually participate in Variable Stock Corporations (S.A. de C.V.) or Variable Stock Limited Liability Companies (S. de R.L. de C.V.). Following you will find some details on both types of organizations:

LIMITED LIABILITY COMPANY Partners are only obliged to pay for their shares. Minimum capital required: $3,000.00 pesos It is necessary to put down and display in full at least 50% per cent of the shares at the time the company is constituted. Minimum 2 partners; maximum 50. None of the partners can have more than one share of the social capital, unless otherwise specified. A manager or a management council will be in charge of managing the company. This position may be occupied by partners o external individuals appointed for a certain period of time or indefinitely.

The supreme authority of the company is the Shareholder’s Meeting. The meetings must be held at the place of business. Decisions will depend on the majority of votes from the shareholders, representing at least 50% of the social capital, except when the company bylaws set a higher majority percentage.

STOCK COMPANY Stockholders are only responsible for paying the price of their stocks. Minimum capital required: $50,000.00 pesos To constitute the company it is necessary to fully underwrite and present in cash at least 20% of every payable share.

Minimum 2 shareholders; maximum unlimited. Shareholders are allowed to have more than one share of the social capital.

The company will be managed by a single manager or a board of directors (partners or not), who will be appointed for a certain period of time and are subject to be revoked.

The supreme authority of the company is the Shareholder’s Meeting. The meetings must be held at the place of business, and may be ordinary or extraordinary. Decisions will depend on the majority established by the bylaws, or the provisions of the General Law of Trading Corporations (Ley General de Sociedades Mercantiles).


These partnerships can adopt the Variable Capital modality in order to increase or reduce their capital through the resolution of a General Shareholder’s Assembly. REMARKS

• • • •

From a legal point of view, there are no advantages or disadvantages in choosing one option or the other. Administratively speaking there are no specific advantages either. Financially and from an accounting point of view there are no special benefits. The only significant difference is the capital investment required to establish a company.

In Mexico we have the Foreign Investment Law, which defines and regulates the activities foreign investors are allowed to perform, establishing percentages, limits, restrictions or conditions on participation percentages. It specifies the activities that may only be carried out by Mexican individuals, and those that allow a certain percentage of foreign investment. In some cases there a few exceptions, which are subject to the decision of the corresponding authorities (The Ministry of Economy). There are some restrictions for the participation of foreign investment, which can not be exceeded directly, or by using trusts, deals, statutory or partnership agreements, pyramid schemes, or any other mechanism granting control or a larger participation; except in case of a neutral investment, meaning it is not considered to determine the percentage of foreign investment in the social capital of Mexican companies or authorized trusts funds. According to the Foreign Investment Law, trading corporations established in Mexico must stipulate in their bylaws an agreement by which foreign partners are compelled to be considered as Mexicans in regard to their shares, social capital, goods, rights, liabilities,

concessions, participation or interests, as well as all the rights and liabilities derived from the contracts they sign as partners. Therefore, they can not request the protection of their governments. Otherwise, they shall include an exclusion clause for foreigners stating the partnership will not admit foreign participation. Hence, partnerships that include an admission or exclusion clause for foreigners in their bylaws will have the right to own, for example, immoveable properties in Mexico for the development of their businesses. Until 1999, companies devoted to manufacture and assemble automotive parts, equipment and accessories were allowed to have a maximum foreign investment percentage of 49%. After that year, regulations were modified to allow 100%, without having to request the approval of Mexican authorities. Nevertheless, and according to the aforementioned law, there are some responsibilities on foreign investment that must be periodically fulfilled to inform authorities about the financial situation of the company, as well as any foreign investment change in order to simply business development opportunities for this industry in Mexico.

2.1.1. Tax Compliance Natural persons and companies have the following tax responsibilities, among others: • Submit tax returns specifying the tax results of the FY or its taxable profits. • Elaborate a financial statement and have a CPA make the corresponding report. • Auditor’s report on the compliance of its responsibilities before the Mexican Social Security Institute (Instituto Mexicano del Seguro Social), in case the company had an annual average of three hundred or more employees during the last FY. Immediate deduction of new fixed assets It is possible to apply the immediate deduction of new fixed assets during the same FY the investment is made, in the same FY they are used or during the following FY.

2.2 Foreign Trade Mexico has many important support programs for production industries, especially the automotive industry, because of the relevance of this sector for the national economy. Following you will find an introduction on the automotive industry support programs, which are intended to promote high competitive levels in international markets.

2.1.2. Tax Incentives

2.2.1. Temporary imports Tax incentives for

export goods (PITEX):

expenses and investments in technologic research and development Taxpayers who pay income taxes on verifiable investments for the development of products, materials, production and research processes are granted a 30% tax credit.

program for the production of This program allows temporary import activities of raw materials from any country, without paying import taxes (according to the provisions of the international agreements signed by Mexico), or VAT or compensation fees (if applicable). The machinery and equipment with the necessary

characteristics to manufacture export products may be imported with the support of this program without paying VAT. It is possible to have access to this program in fifteen business days, but it implies many control responsibilities. Following you will find some of them: 1. Generation of an annual report (summary of foreign trade operations) 2. Return of raw materials in 18 moths, at the latest 3. Automated inventory control system, properly recorded through a computerized system that differentiates national from foreign merchandise, including information on the exported or returned goods, the percentage they represent from the products temporarily imported, the damages and wastes that are not returned, as well as the ones bound for the national market using the first-in-firstout mechanism. The life of this program is indefinite, as long as companies comply with the provisions and exportation of goods.

2.2.2. Maquila Program: Similarly to PITEX program, the Maquila program allows temporary import activities of raw materials without paying foreign trade taxes, VAT and compensatory fees (if applicable). The machinery and equipment with the necessary characteristics to manufacture export products, imported with the support of a Maquila program, do not pay VAT on imports.

Additionally, it allows the importation of goods to offer certain services and their corresponding invoicing to residents abroad, such as exportation services (0% VAT), among others: • Goods supply, storage or distribution services • Merchandise packing, repacking, boxing, reboxing, bottling, marking and labelling; • Merchandise classification, inspection, testing or verification; • Pieces cutting, adjusting, sanding, gluing, polishing, painting or waxing • Restoring and maintenance of goods; • Washing or ironing clothes; • Embroidering or stamping clothes; • Shielding, modifying or adapting an automotive vehicle; • Design or engineering of products, including software; • Recycling or collection of wastes. It is possible to have access to this program in fifteen business days, but it implies many control responsibilities. Following you will find some of them: 1. Generation of an annual report (summary of foreign trade operations). 2. Submit a monthly statistical report of foreign trade operations. 3. Return of raw materials in 18 moths, at the latest.

4. Automated inventory control system, properly recorded through a computerized system that differentiates national from foreign merchandise, including information on the exported or returned goods, the percentage they represent from the ones temporarily imported, the damages and wastes that are not returned, as well as the ones bound for the national market using the first-infirst-out mechanism. The life of this program is indefinite, as long as companies comply with the provisions and the exportation of goods.

2.2.3. Program for companies with high-export levels (ALTEX): This program allows companies with high-export volumes to receive the refund of VAT credit balances in five business days, approximately. It is possible to have access to this program in fifteen business days, but it implies many responsibilities, some of which are: the generation of an annual report (summary of foreign trade operations) and continued efficient export activities. It is important to highlight that the submittal of the annual report renews the life of the program.

2.2.4. Sectorial Promotion Programs (PPS) The PPS allow the definite importation of goods intended for production with a preferential tariff rate, regardless of the country of origin, and the exportation of the resulting products with preferential rates (foreign trade taxes from 0% to 5%). Following you will find the goods that may be imported by industrial sector. The PPS found within the production chain of the automotive industry are:

• Electric industry • Electronic industry • Mining and metallurgical industry • Capital goods industry • Various industries • Chemical products • Rubber and plastic manufacturing industry • Leather industry • Automotive and auto-parts industry To enrol in this kind of programs takes approximately 20 business days. Their life cycle is indefinite, as long as the company complies with the provisions, such as the production of the imported goods and the submittal of an annual report.

2.2.5 Law to promote manufacturing, maquila and export services companies (DIMEX): The law to promote manufacturing, maquila and export services businesses is expected to be enforced by the end of 2006. This law intends to consolidate the Maquila and PITEX programs, annulling the latter. It is necessary to have an Advanced Electronic Signature to subscribe to this program. Benefits:

2. Simultaneous approval of a Sectorial Promotion Program (PPS) 3. The companies enrolled in a previous PITEX or Maquila program can count on the authorization of a DIMEX program. 4. VAT return in 20 days at the latest, if there is a credit balance. 5. Importation of machinery and equipment complying with the foreign sales requirement of 500,000 USD or 10% of the total sales. The life of a DIMEX program is indefinite, as long as control responsibilities are fulfilled, some of which are: 1. The generation of a foreign trade operations annual report according to the program. 2. Keep an automated inventory record to control the merchandise imported and exported during the life of the program. 3. Return of the merchandises in 18 months, at the latest. DIMEX considers the authorization of the Services Maquila programs with a wider range of activities, including, among others, goods repairing, cleaning, quality control testing, packing, painting, and greasing activities.

1. To enrol in this program it is necessary to present an export project (without a maquila formal contract)

2.3. Bonded warehouse The qualification of a bonded warehouse is convenient to get a maximum deferral on the payment of import taxes. This regime states the goods can remain within the bonded warehouse without paying the taxes generated by the import activities for two years, and may be withdrawn at any time to be applied in the national market or in production. One of the main requirements to qualify a bonded warehouse is the tight control of the goods it contains, as well as the deposit and withdrawal dates, and the probable tax payment at the moment of withdrawal for definite import purposes.

2.4. Drawback The foreign trade drawback program allows beneficiaries to get back the general import tax generated by: • Goods, raw materials, parts and components, packages and bottles, fuels, lubricants and other materials incorporated to the exported item • Merchandises returned in the same conditions • Merchandises to be repaired or modified The amount of the drawback is based on the amount paid as general import tax at the moment the export activity is carried out. The drawback of the taxes paid takes approximately 10 business days.

Automotive industry financing The Mexican financial system is basically made of the following institutions: ♦ Treasury Ministry (SHCP). It is the ultimate administrative authority of the Mexican Financial System. ♦ Banco de México. ♦ Mexican Stock Exchange (Bolsa Mexicana de Valores). The purpose of this private institution is to simplify stock transactions and promote the development of the respective markets. ♦ Banks. To carry out banking operations; they receive and concentrate, as deposits, the capitals attracted to make them available to those who know how to manage them. ♦ Development bank (Nafinsa). Promotes savings and investments, as well as the channelling of financial and technical support for industrial promotion and, in general terms, for the national and regional economic development of the country. The development banking institutions have the purpose of financing priority projects for the country. ♦ Investment funds. Provides credit or funding to plan, acquire, develop, build, transfer and manage all kinds of real-estate or personal properties to specific sectors or activities. ♦ Non-banking financial institutions (SOFOLES).

3.1 Financing for assemblers: Traditionally, assemblers based in Mexico finance their operations through resources obtained by their corporations through the International Stock Markets. Likewise, they appeal to local financing sources to obtain and allocate resources for their operation, mainly with short-term credits. In order to attract permanent investments and generate sustained economic growth, some state governments have programs that provide incentives for companies who want to establish in their territories. These incentives may be in cash or in kind, depending of the characteristics of the investment and the specific programs of every location. Usually, these incentives are granted to companies that are planning to carry out large-scale investment projects. Usually, new investors can have access to this kind of programs as long as they are able to generate benefits for a certain period of time. Some of the most common benefits pursued are the generation of a minimum amount of jobs or the contribution or support to state development programs. Additionally, the authorities who grant this type of incentives set periodic results programs that are subject to audit and inspection procedures, and the government has the authority to review the destination of the funds provided.

3.2 Financing for distributors This type of financing comes mainly from trade and development banks through complementary or replacement plans to substitute the ones offered by other

financial agents. These plans allow distributors to acquire units from the assembly plants without making immediate payments and maintaining in their showrooms enough new assorted units until they are sold. Banks have a specialized department that carries out an analysis of the operative performance and profile of the automotive distributors, based on their projected sales level, inventory rotation and internal controls.

3.3. Financing for suppliers (auto-parts) Financing for suppliers of the automotive industry comes mainly from assemblers and international banks. Likewise, as in the case of assemblers, they appeal to the Mexican Financial System to cover short-range cash flow needs. Every year there are many shows and encounters in Mexico, some organized by the Banco Nacional de Comercio Exterior (Foreign Trade National Bank) and Nacional Financiera, in which companies have direct contact with the assemblers operating in the country. These are the main forums for people interested in becoming suppliers of this industry, because they can establish direct contact with any company. Potential suppliers must present a cost-analysis specifying overhead costs, raw materials, labour, indirect expenses and other issues such as supervision, equipment or maintenance. One of the advantages of becoming a direct supplier of the automotive industry is the relatively simple access to credits in dollars from large assemblers or international banks.

3.4 Financing for consumers Consumers can buy new units through the following mechanisms: • Cash sales. Assemblers authorize the application of incentives to offer lower prices than other commercialization options. In Mexico 2% of the sales are made through this means.

Distribution of Automotive Credits


2% 30%

• Plant financing. Plant financing institutions determine the price of the vehicle, the down payment (35% average), the term (12 to 36 months) and the interest rates (from 0% to 18%). • Bank financing. Financial institutions are responsible for establishing the credit conditions (down payment, term, rates). In Mexico the sales through financing (banks and plants) represent 30% of the total sales. • Self-financing. Consists in the integration of consumers groups who periodically give a certain amount of money to acquire new vehicles. All self-financing institutions determine their own adjudication criteria (number of contributions, biddings, raffles, punctuality, etc.). This financing method is for consumers who are not creditworthy and represents 13% of the sales in Mexico. Banks. These institutions offer plans with many different characteristics, and some of the most common ones are the “secured credit” and the “financial leasing”. For secured credits the invoice of the vehicle is in favour of the creditor until it is totally paid, the credit holder can dispose immediately of the vehicle and the payments are generally fixed, terms go from 6 to 60 months. There is a setup commission of 1.5 to 2.3% of the amount to be financed, advance payments are not penalized and the minimum down payment percentage is 7%. The insurance may be paid cash or financed throughout the life of the credit.

55% Banks


Self - financing


research expenses and a setup commission (from 1.5 to 2%), depending on the amount to be financed or a minimum down payment of 15%. Sofoles. They offer a wide variety of plans; therefore, there are many different terms, down payments and interest rates. These partnerships offer secured credits with conditions similar to the ones offered by banks and leasing plans. Their terms vary from 12 to 48 months, the minimum down payment varies from 10 to 35% of the value of the vehicle depending on the plan; it also offers a special payments option (usually annually) to reduce the amount of the monthly payment. The life and damage insurance can be included in the monthly payment.

As for the financial leasing, the consumer has the right to use the vehicle and when the contract expires he has three options: the first one is to use his buying option and pay a percentage of the original value, which may be arranged from the start as long as the amount is lower than the market value at the time of the transaction. The second option is to renew the contract with a lower leasing amount, that is to say, extend the life of the contract, reducing the amount of the instalments. And the third option is to sell it to a third party and divide the money with the leasing institution. The leasing may be paid at a fixed or variable rate, the term varies from 12 to 48 months; it is necessary to pay


II. Regulatory environment of the automotive industry 4.1. Environmental and ecological aspects The applicable environmental regulation and legislation in Mexico is extremely complex and diverse. The first tangible evidence of Mexico’s environmental regulations was recorded in 1986 and it applies to all industries, including the automotive sector. This legislation has gone through many important modifications on the distribution of competencies to maintain the ecologic balance and protect the environment, which complicates even more the interpretation of the applicable rules. The General Law of Ecologic Balance and Environmental Protection was issued when the right to a healthy and clean environment was included in the Political Constitution as a fundamental right, and when regulating the environmental protection became a faculty of the Congress, and also when other Mexican rules and official standards emerged. Considering all this and in order to promote a better understanding, we have divided this subject in the following areas:

4.1.1. Environmental impact The industries must obtain an environmental permit before starting their productive processes, which must include the description, assessment and specification of the impacts their activities will have on the environment, as well as the actions they must implement to reduce those impacts. For environmental issues there are three jurisdiction levels: Federal, State and Municipal, depending on the productive process and the zone where the industries are established. The automotive industry usually depends on the federal jurisdiction, and in some cases, on the state authorities.

4.1.2. Atmospheric emissions Industries are obliged to control, measure and monitor the emission of pollutants into the atmosphere. In order to emit any type of pollutant it is necessary to obtain the proper permit from the authorities. The three levels, Federal, State and Municipal have jurisdiction on industries that generate emission into

the atmosphere due to their productive processes. Jurisdiction depends on the activity and location of the industrial plant. These permits are renewed through the Annual Operation Permit.

4.1.3. Wastewater disposal The industry must comply with the pollution standards and restrictions for the disposal of the wastewaters generated by their productive processes. The jurisdiction applied may be federal or state, depending on the place and location of the disposal. If it is a location, land, lagoon, river or sea, the jurisdiction to be applied must be federal, through the National Water Commission. If the disposal takes place in a municipal sewage system, the municipalities and the states are in charge of applying the proper laws. Industries are compelled to measure and monitor their disposals, and analyze them as well.

4.1.4. Wastes Mexico has recent waste legislations that differentiate all kinds of wastes: dangerous, special-handling, and urban solids. The jurisdiction depends on the type of waste according to the aforementioned division. This means that dangerous wastes continue to be regulated by the federation, except for micro-generators (the ones that generate less than 400 grams of dangerous wastes per year), which are under state jurisdiction. Wastes that require special-handling are under state jurisdiction and urban solids are under municipal jurisdiction. Responsibilities depend also on the type of wastes generated, the resulting amount and their level of danger. This legislation sets the additional obligations and responsibilities of the owners of land and areas polluted by dangerous wastes.

4.1.5. Dangerous substances In some cases, companies handle in their facilities highly dangerous substances; in order to do this it is necessary to obtain the authorization of the federal authorities.

4.1.6. Noise / electric and thermal energy The industry must comply with the maximum external noise, electric and thermal energy emission standards. These issues are usually regulated by state or municipal authorities.

II. Analysis of the automotive industry: 5.1. Overview of the sector The most important change in the national economic arena at the beginning of 2006 has been the increase of industrial activities. After recording only a 1.9% increase in 2005 (compared to a 3.2% industrial growth in the USA) during the last five months (from October 2005 to February 2006), this rate increased to 3.4% (compared to 2.8% in the USA).

The automotive sector is one of the most important sectors for the Mexican economy due to its production value, the jobs it generates and its impact in the foreign trade activities of the country. In the external sector this activity excels for its export (higher than any other sector) and import values, for the significant surplus of its trade balance, and because it is a very attractive area for foreign investment.

INDUSTRIAL PRODUCTION IN MEXICO AND THE USA, 2003-2006 7.0% growth rates) (Annual 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0%

























Source: GEA based on INEGI’s information

The recovery of the industrial sector growth and of the manufacturing exports to the USA has generated higher GDP growth expectations than those forecasted at the beginning of the year. According to the monthly expectations survey carried out by economic analysts and elaborated by Banxico, the expected growth for 2006 rose from 3.49% in February to 3.92% in April.


Economic growth forecast for 2006 (Annual growth rates) GEA based on the information of Banxico’s Monthly Economic Expectations Survey

Evidently, the increase of industrial growth recorded during the last few months has basically depended on the increase of manufacturing activities, which for the first time in four years, concurred with the dynamic growth of the construction sector. However, within manufacturing activities, not all sectors have shown

a sustained development trend. Only the sectors that have recovered their exporting capacity to the USA show higher levels than the average growth of the national GDP. In fact, only the machinery and equipment subdivision (which includes the automotive industry), shows an annual rate increase of more than 7%.

MANUFACTURING PRODUCTION IN MEXICO (Actual annual growth from Oct. 2005 to Feb. 2006)

More than 88% of the manufacturing growth during the last four months was due to the increase in the machinery and equipment subdivision. In fact, only 6 out of the 53 types of activities included in the machinery and equipment subdivision show an increase higher than 4% during the last four months, and a market share 1% higher than the subdivision’s production value. In this case, the “relatively” most important activity is the manufacturing and assembly of cars and trucks, which represents 50% of the machinery and equipment subdivision, and its annual rate increased 28.9% from October 2005 to February 2006.

Machinery and equipment



5.5% 3.2%

Average production Non-metallic minerals


Basic metals


Food, drinks and tobacco


Paper, printing houses and editorials


Chemical products, rubber and plastic Textiles and clothes -3.0%

0.4% -1.7% -1.0%





Source: GEA, based on INEGI´s information


The main issues that characterized the recent evolution of the automotive industry in Mexico are: • The recovery of the vehicles production from 2005 to 2006. • The increase of exported units. • The moderate increase of the internal retail sales during 2005 and 2006. • And finally, the agreements between Mexico and Brazil/Argentina, which have shown a very unbalanced trade exchange; we import more than we export to both countries.



Production (actual value variance) Vehicles Auto-parts Exports (variance in USD) Vehicles Auto-parts Imports (variance in USD) Vehicles Auto-parts Retail sales (variance in units) Sales to distributors (variance in units)

Source: GEA, base on the information provided by INEGI, Bancomext, Banco de México and AMIA.

5.1.3. Production After a period of relative shrinkage in the automotive production between 2001 and 2004, when the number of vehicles manufactured in the country dropped an average of 4.5 per cent every year, in 2005 and the beginning of 2006 the trend changed drastically. In 2005 the number of units produced in the country increased 7%, while during the last five months (October 2005 to February 2006) the vehicle production volume increased 35.9%. The production decrease in 2001-2004 was caused by the competitiveness erosion in the external markets of some of the models produced in the country,

especially in the USA. Besides, there was an increased competition from Asian vehicles. Also, many models exported by the Mexican automotive industry entered the final stage of their lifecycle in 2001-2004. Evidently, this behaviour also resulted in a yearly average contraction of 4.8% of the production value from 2001 to 2004, a behaviour that reverted in 2005 with an expansion of 3.7%. That behaviour was basically recorded by the end of 2005 and the beginning of 2006. Actually, the annualized increase of the automotive production value between October 2005 and February 2006 rose to 23%.


Source: GEA, based on INEGI´s information

As shown in the chart, the recovery process of the vehicles production is not the same as the auto-parts segment. Between 2001 and 2004, the auto-parts production value shrunk an average of 2.2% a year, a behaviour that continued in 2005 (-2.2%). Actually, this shrinkage was deeper between October 2005 and February 2006, dropping at an annual rate of 3.6%. In terms of vehicles production, the most significant expansion during the last six months was recorded in the six and eight-cylinders vehicles segment (at an annual rate of 460%), which increased its production

level from an average of 7,200 units per month from 2001 to June 2005, to 35 thousand units in the last six months. In a downward order and according to its recent growth, we have the production of tractor-trailer-trucks (19.7%), 4-cylinder vehicles (15.8%), commercial and light vehicles (7.6%) and integral buses (6.2%). Heavyduty buses production was the only one that showed a drop during the aforementioned period (-7.7%).

VOLUME OF UNITS PRODUCED BY SEGMENT (Annual growth rates from Oct. 2005 to Feb. 2006) 4 cylinders

15.8% 460%

6 and 8 cylinders


Commercial and light


Medium-size trucks Heavy trucks Integral buses

-7.7% 6.2% 19.7%

Truck tractors


Total units








Source: GEA, based on INEGI´s information


5.1.4. Sales During 2005 and the first quarter of 2006 the growth of the internal vehicles retail sales was moderate, 3.3% and 3.7%, respectively. This dynamic was lower than in 2004, when the internal vehicles sales raised 12.1%. The drop in interest rates and the higher access to credits are the two main factors that explain this behaviour. Additionally, another element that contributed to the increase of internal sales is the important reduction of the “relative price” of cars (25% in actual terms between January 2000 and March 2006). Evidently, competition between distributors, financing plans (increasingly attractive), and macroeconomic stability continue generating a favourable environment for car sales.

SALES (Var. % in units) 1,200,000















177,070 370,493




400,000 451,195

The growth of automotive production during the last six months was basically due to the investments of the main assemblers established in the country, with the purpose of upgrading the production lines and increasing the production of new models. All this originated the increase of the number of vehicles produced by Ford (266%), Volkswagen (114%) and General Motors (34%) during the first quarter of 2006. Also, in a more moderate way, other assemblers also increased their production, for example: Nissan (21%), Chrysler (11%) and all the rest (29%).





0 Domestic production

Ene-mar 2006


Source: GEA, according to AMIA’s information

5.1.5. Foreign trade A few years ago, most companies of the end-product automotive industry in Mexico applied the strategy of specializing in the production of only a few models, mainly for the exports market, and increased the internal offer through imported units. Nowadays, 75% of the vehicles production is exported and 63% of the integral sales volume is made of imported units. The main destination of the vehicles exported by Mexico continues to be the NAFTA countries, and imported units come mainly from the USA, Canada, Argentina and Brazil. From 2001 to 2004, vehicles exports showed a continuous decrease. However, in 2005 they increased 11.2%, compared to 5.9%, 6.6%, and 3.6% during the three previous years. Actually, during the last six months the annual growth rate of vehicles exports increased 43.3% (49.7% for cars and 31.9% for trucks).

Although the USA market is the main consumer of cars in the world, Mexico’s exports to that country decreased 4.2% in 2005. Nevertheless, 86.1% of the exports went to the USA. It is important to mention the exports increase to Japan, from 0.0% in 2004 to 0.9% in 2005. Regarding the auto-parts’ sector performance, the US concentrated 92.5% of the value in 2005 (compared to 93.7% during the previous year).

VEHICLES EXPORTS (USD) 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000

20 00 20 /01 00 20 /04 00 20 /07 00 20 /10 01 20 /01 01 20 /04 01 20 /07 01 20 /10 02 20 /01 02 20 /04 02 20 /07 02 20 /10 03 20 /01 03 20 /04 03 20 /07 03 20 /10 04 20 /01 04 20 /04 04 20 /07 04 20 /10 05 20 /01 05 20 /04 05 20 /07 05 20 /10 06 20 /01 06 /0 4




Source: GEA, based on INEGI´s information

VEHICLES EXPORTS BY DESTINATION Share (%) Total Total United States United of America States of America Germany Germany Canada Canada Japan Japan Venezuela Venezuela Argentina Argentina Chile Chile Colombia Colombia United Kingdom & Ireland United Kingdom & Ireland Brazil Brazil

Share (%)


Share (%)

Total Total United States United of America States of America Canada Canada Germany Germany Australia Australia Brazil Brazil Japan Japan China China United Kingdom & Ireland United Kingdom & Ireland Spain Spain Argentina Argentina Imports show the opposite behaviour. Vehicles increased 24.8% in 2005, while auto-parts showed less dynamism (16.4%). The dynamism of vehicles imports is the result of the strong national consumption level.


IMPORTS (Var. % USD) 30.0 25.0 20.0 15.0 10.0 5.0 0.0 -5.0 -10.0 2001

2002 Cars




A uto-parts

Source: GEA, based on INEGI´s information



Share (%) Total Total United States of America United States of America Germany Brazil Canada Japan Japan Canada Venezuela Germany Argentina Argentina Chile Spain Colombia South UnitedKorea Kingdom & Ireland United Brazil Kingdom & Ireland France

Share (%) Total Total United States of America United States of America Canada Germany Germany Japan Australia Canada Brazil Brazil Japan China China France United Kingdom & Ireland Spain Spain South Korea Argentina Taiwan

Imports show the opposite behaviour. Vehicles increased 24.8% in 2005, while auto-parts showed less dynamism (16.4%). The dynamism of vehicles imports is the result of the strong national consumption level.

5.2. Competitive environment


Economic units

5.2.1. Competitors According to the Automotive Industry Economic Census of 2004, there were 1,823 companies, 16.2% more than the Census of 1999 (1,569). There was a general decrease in the manufacturing units that employ fewer individuals. Therefore, in 1999 the units with less than a one hundred people concentrated 81.8% of the units, and 69.8% in 2004, a 12 per cent decrease.

Distribution %

Automotive industry 0 to 2 people 3 to 5 people 6 to 10 people 11 to 15 people 16 to 20 people 21 to 30 people 31 to 50 people 51 to 100 people 101 to 250 people 251 to 500 people 501 to 1000 people 1001 and more

Source: GEA, according to the information provided by INEGI and the 1998 and 2004 Economic Census


Cars and trucks

Bodies & Trailers

Engraved mechanical pieces

Engines and their spare parts

Seats Suspension-system spare parts, transmission system

Electric and electronic equipment

Source: GEA, according to the information provided by INEGI and the 2004 Economic Census.

5.2.2. Concentration of competitors The concentration of the automotive industry competition in 2005, specifically in the cars and truck assembly and manufacturing sectors, is high. There are eight automotive companies registered in AMIA (The Mexican Association of the Automotive Industry), who manufacture the units in Mexico. Four of them concentrate 90% of the production. In 2005, General Motors was again the leader with 697 thousand units produced, concentrating 23.3%. It was followed by Nissan with 23% of the production (658 thousand units). Of these economic units, 69.5% are companies devoted mainly to the manufacturing of parts and accessories for cars and trucks. It is important to mention that the manufacturing and assembly of cars and trucks only represent 2% of the companies of this industry (30 units). On the other hand, the production of bodyworks, trailers and other parts represented 49% (526 and 369 units, respectively).



However, it is important to highlight the behavior of retail sales by company due to the significant foreign trade flows. In 2005 there were 26 brands available in Mexico.

Source: GEA, according to the information provided by AMIA.

BRANDS AVAILABLE IN MEXICO: 2005 General Motors Nissan Ford Motor Volkswagen DaimlerChrysler Honda Toyota Renault Seat Peugeot Mitsubishi BMW M. Benz Lincoln

Lincoln Audi Volvo M. Benz Vans Mini Acura Mazda Land Rover Suzuki Smart Porsche Jaguar Mg Rover

General Motors was also sales leader in 2005 with 249 thousand units sold (21.7%). It was followed by Nissan Mexicana with 20.4% of retail sales (234 thousand units). As for the geographical distribution of production, in 2004, 27.2% of the gross vehicles production concentrated in Coahuila, followed

by Guanajuato and Puebla, with 21.9% and 20.2% of the production, respectively. However, due to the important foreign trade flows it is important to consider the retail sales behaviour by company. In 2005, there were 26 brands available in Mexico.


Concentration of gross production More than 20% Between 10% and 20% Between 1% and 10% Less than 1%


Concentration of gross production More than 20% Between 10% and 20% Between 5% and 10% Between 1% and 5% Less than 1%

Auto-parts production is more diversified geographically speaking. However, Chihuahua concentrates 21.6% of the gross production value, followed by Coahuila, Estado de México and Nuevo León with 12.0%, 10.9% and 10.3%, respectively.


5.2.3. Other indicators Main indicator New competitors

As the sector’s dynamism continues there are new competitors, who are quantified by the number of models they offer to consumers. New models launched in 2005: o January-March: - Verna (DamlierChrysler) - Lupo (VW) o September-December: - Forfour (Smart) - G6 (General Motors) - Uplander (General Motors) - H2 (General Motors) Other models launched in 2005 and the current year: - Fiesta Sedan (Ford) - Altea (SEAT) - G4 (General Motors) - Bora (VW) - Sportback (Audi) - Montana (General Motors), among others

Import barriers

Are high concerning production. Are low concerning commercialization.

The main barrier is the infrastructure

Dependence of limited external resources

Medium/Low: The inputs of the industry belong to competitive markets.


5.3. Perspectives 5.3.1. Future changes for the industry In the last few years the global automotive industry has been negatively affected by the high prices of some of its inputs (steel and fuels), and by the high prices of gasoline. All this has relatively favoured the demand of some vehicles with higher fuel-consumption efficiency.

All this made some of the main automotive companies of the country apply important realignment programs that will include the closing of some assembly plants, as well as layoffs in the plants located in the USA and Canada.

Likewise, some companies of this sector in the USA have faced serious financial problems originated by a relative decrease in the demand of their vehicles, the adoption of certain price policies and the elevated labour costs. These costs, derived from pensions programs and good healthcare services for workers.

The outlook for the automotive industry in Mexico is favourable, because in the last few years the automotive companies have made important investments to expand and upgrade their production capacity and recently announced the construction of new plants. Actually, in general terms, the forecast of

these companies in Mexico is they will have a positive performance for the rest of the year. However, the positive performance recently recorded in Mexico by the production and export activities is not risk-free. It is necessary to consider that during the first quarter of the year the total sales of vehicles in the USA showed and increase of only 1.1%. This would imply that the increase of the units exported to that market from Mexico, has generated a production substitution in both countries, and we do not know how long it will last. Nonetheless, assemblers keep trying to reduce costs, which has originated additional pressures in the auto-parts segment. These companies have been “forced” to settle in locations near the assemblers and to set “specific” distribution processes in order to minimize storage costs. It is expected for these trends to continue, adding more pressure to the margins of auto-parts manufacturers.

5.3.2. Market-growth perspectives The perspectives of the automotive industry are favourable in terms of sales due to the economic recovery and the increase in model’s supply, which will generate even more competitive schemes to promote the consumption of these products. However, considering the previous year, dynamism levels will be lower. In 2006, sales to distributors are expected to increase 12.3%.

VII. Main PwC business solutions for the automotive industry 6.1. Services The global automotive industry is extremely dynamic and is constantly facing innovations that require specialists in many different disciplines in order to achieve real competitiveness.


Our country has turned into a global automotive export platform, since some of the most important companies are increasingly using it as exclusive supplier of some of their models. Although this industry has been affected by economic crises, its capacity to recover has been greater and has managed to stay afloat and remerge even stronger than before.

Automotive companies, as well as all its related sectors, need advisors with unique characteristics and abilities to help them face the changes effectively, solve their business problems through practical and innovative solutions with a deep knowledge of the industry and an extensive geographical coverage to effectively respond to the challenges caused by globalization.

In PricewaterhouseCoopers we have the necessary capacity and attributes to provide world-class advisory services, and we have also developed an extensive experience based on proven and successful approaches, which we continuously improve. Our professional staff specialized in the automotive industry – cars, buses, trucks and truck tractors manufacturers, distributors and parts suppliers- is divided in interdisciplinary teams in order to help our clients design, choose or adjust the best strategy for their companies, as well as to maximize or transform the competitive advantages of their businesses.

• Identify double payments • Track expensive pieces in the inventories • Costing based on activities • Costs and expenses reduction • Sarbanes-Oxley advisory and training • Digitalization • Benchmark processes • Automotive, auto-parts and distributors transfer pricing • Bonded warehouse • Registration in ALTEX, PITEX, and Maquila programs or the programs supported by the Law for the Promotion of the Manufacturing, Maquila and Export Services Companies. • Automotive lobbying with government authorities • Advise for value-reduction assessment of long-range tangible and intangibles assets.

6.2. Main challenges of the automotive industry in Mexico and PwC solutions 6.2.1 Costs reduction Assemblers have to balance their relationship with suppliers and demand innovation from them. Likewise, assemblers expect their suppliers to keep the prices within a reasonable margin. In fact, during the last 10 years, assemblers have put an intense and continuous pressure on their “Tier 1” suppliers’ costs, making them reduce the prices an average of 3% every year. As a result, suppliers have seen a gradual deterioration of their financial performance, which forced some of them to consolidate and some others to declare bankruptcy.

Therefore, a weakened suppliers’ community it is not a proper scenario for assemblers. After all, suppliers have turned into the main innovation source of the automotive industry. Nevertheless, assemblers continue to pressure their suppliers to reduce costs. In order to remain in a competitive level, suppliers have considered mergers, acquisitions, strategic partnerships (joint ventures) and low-cost supply in order to increase their incomes, maintain their market-share, use their assets more effectively and increase assemblers leverage. Unfortunately, the expected benefits related to these goals are generally not accomplished, resulting in more pressure on the profit margins and the financial performance. Obtaining costs reductions and process improvements will continue to be a challenge and a key issue for assemblers and their suppliers. Suppliers can not allow themselves to focus on just one operative area. In order to be successful in this hostile environment, it is necessary to make improvements in all areas.

As part of the process, the companies of the sector compete to increase the usage rate and obtain competitive advantages; some of them frequently look for mergers, acquisitions and joint-ventures. However, it is necessary to be cautious with this type of transactions. In almost every industry, most “deals” do not generate stockholders’ value. There are multiple reasons for this, including organizational culture incompatibility, synergies not materialized, inability to implement changes in the new organizations and the difference in managerial styles.

Support of PwC Mexico PricewaterhouseCoopers Mexico has developed a proven framework to increase the value of the transactions of this industry. PwC Mexico industry professionals can help companies achieve the following: 1. Develop regional strategies focused on local markets and the preferences of local consumers.

The support of PwC Mexico

2. Implement successful market and acquisition “due diligence” processes.

PwC Mexico is uniquely positioned to help automotive suppliers meet their needs and obtain successful results. PwC Mexico can provide the necessary capacities to effectively reduce costs, eliminate misuses and improve processes and relations.

3. Establish a unique relation with strategic “targets”.

PwC Mexico has wide experience in the automotive sector and our professionals are capable of providing solutions even in the most complex and challenging environment. From suppliers to end-users, from the sales point to the back office, PwC Mexico can make suppliers achieve their goals.

6.2.2 Consolidation of the automotive industry through mergers, acquisitions or disinvestments The highly competitive environment in which the automotive industry operates is characterized by globalization, consolidation and excessive capacity in all the segments of the supply chain, from design and development to manufacturing and sales. Automotive companies continue looking for economies of scale to develop platforms to be used in many markets around the world. Suppliers must find a “global price” that is continuously fixed in emerging markets. Assemblers and suppliers face a capacity surplus with a global usage rate of less than 80%.

4. Develop a risk management program and implement an aggressive strategy for mergers and acquisitions.

6.2.3 Emerging markets Emerging markets are definitely in the spotlight. PwC AUTOFACTS estimates that almost one third of the automotive industry global growth in the vehicles assembly segment, from now to 2012, will be originated in China. India and East Europe are also emerging fast as markets with a strong growth rate during this period. Currently, many automotive companies are realizing that profits in emerging markets are higher than in most mature markets. However, it is necessary to apply different tactics in merging markets, which causes some problems. One of the main issues companies must consider is if they really should to compete in the emerging markets. More than 56% of the CEOs of the automotive industry surveyed by PwC for the 8th Global CEO Annual Survey said they are already carrying out “offshore” activities or are planning to do it in the near future. PwC Mexico can provide a clear view of the convenience of operating in an emerging market and to what extent. Once the decision is made, there are a million questions to answer, like if you should enter the market alone or with a partner.


PwC Mexico offers specialized services to help organizations find the most reliable and high-quality potential partners, and also to define the type of relationship to establish.

Support of PwC Mexico The practice of PwC’s global network is uniquely positioned to meet the needs of your organization in emerging markets. The network of PwC member firms has more than 20,000 professionals working in every emerging market around the world. If the market is in China, India, Thailand, Brazil or East Europe, we can help you work with local suppliers and develop processes to achieve world-class quality, while properly managing the risks.

6.2.4 Excessive labour costs, production capacity, inventories and other pressures on the margins Characterized by a severe structural overcapacity and increasingly aggressive competitors, the global automotive sector is linked to a devastating price war. Incentives for consumers in North America increased to 45 billion dollars during 2005, and in Europe the price war is equally aggressive. Likewise, the high growth recorded in China has suffered the impact of price deflation on new cars as the result of a more intensive competition. Auto-parts suppliers around the world discredit the continuous reduction of prices from their clients (automotive manufacturers), while the increase of inputs prices is putting additional pressure on some suppliers.

What causes this unpleasant situation? The answer is simple: the automotive industry has surpluses in almost everything – too much capacity, too many competitors, too much surplusage. We still have to wait to enjoy better results from globalization, consolidation and rationalization. For example, according to AUTOFACTS, overcapacity in the light vehicles production is currently 20 million units – the equivalent to 80 assembly plants– which corresponds to a 76% usage rate. Even if the industry achieves the expected growth of 10 million units in the next 8 years, it is very unlikely that the general used capacity reaches 85% of the profitability threshold. And given the market complexity and the increasing interdependence, there are some risks and volatility sources. The future of this hyper-competitive industry is uncertain.

Support from PwC Mexico PwC Mexico has been an active participant in the development and planning of the industry strategies for almost 20 years. We know how to design and implement a risk management process in every operative area, including strategy and planning. Our risk management approach is not to make a company more resistant to risks or more conservative. On the contrary, a good risk management is about creating an organization that fully understands the risks it faces – and the risks it is willing to accept to capitalize its opportunities.

6.2.5 Improvement of the automotive industry supply chain In the last few years, the risks of the companies that constitute the automotive industry supply chain have increased dramatically, due mainly to their transactional operations, as well as to the fight for costs reduction. Evidently, the pressure to reduce costs has made assemblers try to transfer this responsibility to suppliers, who sometimes do not have the necessary experience or capacity to face it. Therefore, we constantly find problems in the vehicle commercialization process due to the difficulties of the supply chain. In the automotive industry supplier’s failures are critical, since they may cause the arrest of the production line with the subsequent financial losses. The main assemblers have observed that their Tier 1 suppliers, who are responsible for the supply chain, do not have the capacity to control secondary suppliers, and assemblers have to support them directly. This support may include a better production calendaring through the implementation of actions that allow secondary suppliers effectively respond to changes. However, they will probably need additional assistance, such as technical support, process assistance and, in extreme situations, financial support to maintain the required inventory level or invest in equipment and technology.


Support of PwC Mexico

6.2.7 Regulatory environment

Through a meticulous selection of suppliers and the realignment of the supply chain, PwC Mexico

During the last few years automotive stakeholders have faced important changes in the regulatory environment, which have had a significant direct impact on their operations and accounting procedures. Some of the most important changes are:

Can help assemblers and suppliers prevent the complex problems of operating in the automotive industry. Our product known as “SecureSource” focuses on helping companies identify suppliers with optimum costs, even in other countries. “SecureSource” is based on our global network of professionals to perform due diligence processes on new suppliers and verify their commercial and production capacities. Likewise, along with “SecureSource”, we can help assemblers design methods and procedures to transmit suppliers their inventory needs in real time. Also, these two approaches improve the performance and costefficiency of the supply chain.

6.2.6 Distributors and concessionaires Vehicles distribution is facing a global transformation. Distribution networks and assemblers are developing based on a strict goals/objectives layout. Besides, assemblers are requesting distributors to invest in new technologies and facilities, and assume the necessary risks to obtain the corresponding return on investment. With assemblers’ new focus on branding and client’s loyalty, distributors’ networks are considered, more than ever, a strategic asset. Distributors face the challenge of operating larger organizations with greater capacities. For example, distributors who operate locations with several franchises must develop the “capacities” to allow them identify and monitor operational problems properly. Distributors must have the proper abilities to increase the service and advisory level by associating with other suppliers specialized in technology, finance and legal issues, etc.

Support of PwC Mexico PwC Mexico has specialized advisors to support the distributors of the automotive industry, who can help them define a strategic plan and assess their operations. With the proper tools, like BAF, we can analyze the basic assessment parameters to operate the distribution channel and look for solutions to optimize operations. Likewise, we can support “one-brand” or “two-brand” suppliers in the successful assessment and implementation of a conversion strategy to become distributors of multiple brands.

• The changes on local accounting principles • The IFRS • Sarbanes-Oxley compliance • The new Stock Market Law • Tax laws • International agreements These new regulations, which have a great impact on the automotive value chain, imply important challenges for the industry. Companies that operate in this changing regulatory environment, frequently face complex questionings and situations. For example, the capitalization of development costs according to the IFRS represents a complex issue that most industries have to face. Likewise, some issues derived from the Sarbanes Oxley Act and the New Stock Market Law; make companies adopt basic Corporate Government measures within an internal control environment to allow a clear and timely identification of the risks and set the proper controls to prevent them. On the other hand, tax law complexity and international agreements represent, in most cases, opportunity areas to ensure the proper compliance of the provisions.

Support of PwC Mexico In PwC Mexico we have specialized and multidisciplinary teams, who can provide the best advisory services to comply with the great variety of regulations in the automotive industry, analyzing the risks from different perspectives.

6.2.8 Sustainability and environment During the last few years, the automotive industry has witnessed the establishment of many global alliances (VW-Skoda, Renault-Nissan, GM-Daewoo- Daewoo, etc.). Every business merger brings a wide variety of environmental and sustainability issues that make it necessary for assemblers and suppliers to share information on the environment and manage the risks during the transition process. Assemblers, on one

side, have shown an important leadership in implementing techniques to optimize the environmental impacts generated by their operations, as well as in communicating to the community the actions they take. Environmental issues and public opinion are increasingly influencing the decisions of assemblers on the following subjects: • The combination of the materials used in production (steel, aluminium, crystal, plastic), affecting the selection of suppliers; • The type of engine (gasoline, electrical, hybrid, hydrogen, gas LP), which affects production technologies; • And the life of the vehicle, which requires the proper selection of materials and components. For all these reasons, it is necessary to consider this evolution from a product’s lifecycle perspective (production, use and durability) to determine the global impact of the changes proposed.

Support of PwC Mexico PwC Mexico offers a wide range of integral services focused on supporting management to handle operational sustainability issues, such as: • Audit or definition of environmental liabilities • Audit of sustainability reports (Global Reporting Initiative) • Funds of Carbon (Clean Development Mechanism) • Sustainable development strategy • Sustainability track • Regulatory compliance • Advisory for ISO 14000 certification • Assessment of social and environmental issues for manufacturing plants and suppliers • Social responsibility report and fourth financial statement


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