Impacts of COVID-19 on the Car Manufacturing Industry in Mexico

Impacts of COVID-19 on the Car Manufacturing Industry in Mexico
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Impacts of COVID-19 on the Car Manufacturing Industry in Mexico
Introduction
The COVID-19 virus has spread to numerous countries across the world, causing widespread concern about the immediate and long-term impacts on business establishments. As the pandemic ravages through world economies and key sectors, one of those affected is the automotive industry, especially in regions that house the major production hubs or are home to critical links in the global supply chain. This paper focuses on the present and possible future effects of the novel Corona Virus on the car manufacturing industry in Mexico. This country has exhibited massive growth in automobile production and export and thus holds a top position in the industry globally. This paper discusses the key factors that have made Mexico a top car manufacturing hub; addresses the problems and challenges that may be faced by automakers in Mexico due to the Corona Virus or other existing issues; provides recommendations for the Ford Company in Mexico.
Key Factors for Mexico’s Success in Car Manufacturing and Export
Mexico has no automakers of its own, yet it has become one of the leading manufacturers and exporters of automobiles in the world. Accordingly, the country is a leading focus for many automobile companies across the world, including Ford, General Motors, BMW, Toyota, and others. Several key factors are responsible for Mexico’s flourishing car manufacturing and export activities. First, the country’s geographical location is strategic as it neighbors economic powerhouses such as the U.S. and Canada. Correspondingly, the two established economies have some of the world’s largest connections to car markets through their ports along their Atlantic and Pacific coastlines. Therefore, Mexico’s strategic position makes it an important link that benefits automotive firms in the U.S. and Canada as a supply chain for inputs, outputs, or both (Swiecki & Menk, 2016).
Secondly, the North American Free Trade Agreement (NAFTA) has played a big role in improving Mexico’s performance in the automobile production and export business (Klier & Rubenstein, 2017). The trade agreement that came into force in 1994 reshaped economic relations in North America and thus provided an impetus for unprecedented trade and interaction between the U.S, Canada, and Mexico. Features of NAFTA such as the elimination of trade tariffs and liberalization of trade for automobiles among other products have improved Mexico’s ability to produce and export large volumes of automobiles to the large American and Canadian industries (Chatzky et al., 2020). Moreover, the economic benefits derived from trading with the two countries has enabled Mexico to venture into other markets across the world. Other features under the trade agreement that have been beneficial to Mexico’s automobile industry include the protection of intellectual property rights, established mechanisms for dispute resolution as well as side agreements to safeguard labor and the environment. An updated version of NAFTA called the United States–M...