Arizona, Mexico, and the North American Automotive Industry: Opportunities and Uncertainties

Arizona, Mexico, and the North American automotive industry: opportunities and uncertainties
January 24, 2017
Vera Pavlakovich-Kochi, Ph.D., Senior Regional Scientist and Associate Professor of Geography and Regional Development

AZMEX is currently conducting research on the relationship between the State of Arizona and Mexico’s automotive industry. Complete findings will be published in a forthcoming report “Arizona and the Mexican automotive Industry: so near, but how far from the core?” This posting provides some highlights from this ongoing research.

How is Arizona’s economy positioned with respect to Mexico’s automotive industry? The question is relevant not only because the automotive industry has become the backbone of Mexico’s manufacturing sector in the 21st century, but also, and perhaps more importantly, because Mexico is now a key partner in the highly integrated North American vehicle production supply chain.

To answer this question, Arizona’s location relative to Mexico’s automotive industry hubs is examined. Relative location, to a large degree, impacts the present share of automotive manufacturing products imports/exports flowing between the U.S. and Mexico which are handled and facilitated by Arizona’s border ports of entry. Unlike Michigan, Ohio, or Illinois, Arizona has no motor vehicle assembly plants, but there is a large array of parts and components that the contemporary vehicle production companies outsource from a variety of manufacturing industries. Therefore, by examining Arizona’s exports and imports to and from Mexico insights can be gained into the degree to which Arizona’s manufacturing sector is integrated into the North American automotive production system. The upcoming report suggests untapped opportunities for Arizona, and sheds light on possible impacts on Arizona’s economy if changes are executed to the NAFTA framework with implications for the automotive industry. 

Some highlights from the forthcoming report:

In 2015, the US exported to Mexico $24.8 billion worth of automotive manufacturing products consisting of motor vehicles, motor vehicle bodies and trailers, and motor vehicle parts. Automotive exports accounted for 11.8 % of total US exports to Mexico. In comparison, automotive exports from Arizona accounted for a smaller share of total exports to Mexico, a 6.2 % in 2015. However, share of automotive products in total exports from Arizona to Mexico more than doubled since 2013, Figure 1.              

 Figure 1: Automotive products as % of total exports to Mexico
Source: AZMEX based on USA Trade Online

In 2015, the US imported $95.2 billion worth of automotive manufacturing products consisting of motor vehicles, motor vehicle bodies and trailers, and motor vehicle parts from Mexico. Automotive imports accounted for 32.1 % of total US imports from Mexico. In comparison, automotive imports accounted for a smaller share of total Arizona's imports from Mexico, a 10.5 % in 2015. The share of automotive products in total US imports from Mexico increased from less than 20% in 2008 to more than 30% in 2015. In Arizona's imports from Mexico the share of automotive products declined since 2010, although the dollar value increased from $685.0 million in 2010 to $782.6 million in 2015, Figure 2.

   Figure 2: Automotive products as % of total imports from Mexico
Source: AZMEX based on USA Trade Online

Automotive manufacturing products account for more than 23% of total US trade (imports and exports) with Mexico, in comparison with Arizona's share of 8.2% (2015).  The share of automotive products in US trade with Mexico increased from 15.2% in 2009 to 23.5% in 2016 (through November). Importance of automotive products in Arizona's trade with Mexico increased at a slower pace, from 5.0% to 7.9% in the same period, Figure 3.
Figure 3: Automotive products' share in total trade with Mexico (%)
Source: AZMEX based on USA Trade Online