Mexico’s auto production is expected to drop 30% this year 2009 as US demand slumps, the president of the Mexican automobile industry association (AMIA) said.
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Eduardo Solis said US consumers were postponing buying durable goods, including Mexican-built cars, adding the market had suffered its worst first half of the year since 1967 “in terms of consumer confidence”.
He added that vehicle production in Mexico was likely to fall in annual terms every month to the end of June 2010 and start to rise after that. Mexico produced 2.1m cars in 2008, of which 1.7m were sold abroad, according to AMIA.
The slump in the auto industry, which accounts for over 17% of Mexico’s gross domestic product, may aggravate the country’s worst recession since 1932. Latin America’s second biggest economy would shrink as much as 7.5% this year, the central bank said last week.
Solis added: “This is an important sector. There are states where 30% or 40% of the gross domestic product comes from the auto industry.”
AMIA, which represents the local units of companies such as General Motors, Ford and Volkswagen, would propose cutting taxes on the sale of new cars when the nation’s lawmakers meet in September, Solis said.
It will suggest eliminating a tax specifically aimed at new car sales plus an increase of raising the amount of a sale that buyers can deduct from their taxes.
Mexico has fallen behind other Latin America countries such as Brazil, where taxes have been cut to maintain auto sales during the financial crisis. Brazilian sales of new vehicles are expected to reach a record high of 3m this year.
