Strong foundations drive financing demand

The Mexican automotive industry is a major economic driver for the country. Companies across production, sales and after-sales work together to create broad economic development throughout the supply chain.

The industry first arrived in Mexico in the early 20th century. Ford, General Motors and Chrysler were the first North American companies to set up operations, serving domestic demand.

During Mexico's industrialisation boom known as the "Mexican Miracle", the sector expanded further. Volkswagen and Nissan started operations whilst Ford, General Motors and Chrysler opened additional plants.

In 1994 the North American Free Trade Agreement (NAFTA) brought more brands to the Mexican market. However, the industry faced significant challenges early on, with economic crises hitting hard in 1994, 2000 and 2008.

Despite these setbacks, the market demonstrated remarkable resilience. Since NAFTA's signing, numerous new brands have entered the market, bringing the total to 63 by 2024. The recent surge of Chinese brands is particularly notable, with manufacturers such as JAC, BYD, Tank, Changan, and SERES making their mark in 2024.

Sales performance reflects this gradual recovery and growth trajectory. The market peaked at 1.6 million vehicles in 2016, before facing additional disruptions from pandemic-related supply chain issues and reduced consumer demand in recent years. However, the industry is showing strong signs of recovery, with total sales reaching 1.5 million units in 2024, demonstrating the market's ability to bounce back and adapt to challenging conditions.

Market evolution shows dramatic brand expansion

The total number of brands in the Mexican market has grown substantially since NAFTA was signed in 1994. Initially, the market was dominated by established groups including GM, Ford, Nissan and Volkswagen.

By 2016, the landscape had transformed dramatically with new brands nearly doubling the market options—an increase of almost 250%. Major Asian manufacturers including Toyota, KIA and Hyundai established strong presences during this period.

The growth accelerated further by 2024, with a 394% increase bringing notable new entrants such as MG, Chery, GWM, Changan, Omoda, Seres, Dongfeng, Baic, Geely, and Zeekr. Industry expectations suggest this trend of new brand arrivals will continue in the coming years.

*NAFTA: North American Free Trade Agreement (NAFTA) free trade zone between Mexico, the United States and Canada, eliminating tariff barriers and promoting investment among the three countries.

Financing drives most purchases

Most Mexicans buy vehicles through finance. Automotive credit makes up 60% of total sales.

Financial institutions compete by offering attractive incentives including discounts, one year of free insurance, promotional low rates and flexible terms.

Three types of lenders provide these products:

• Captive finance (manufacturer financing)
• Banks
• Auto finance companies

Captive finance companies dominate the market through partnerships with banks and auto finance firms. These alliances help drive sales effectively.

This approach works well for new Asian brands entering Mexico: Arra, Baic, BYD, Changan, Chery, Dongfeng, Gac, Geely, GWM, Jaecoo, Jetour, JMC, MG, Omoda, Seres, Sev, Skywell, Zeekr.

                                                            Source: JATO DYNAMICS 

SUVs gain market share

Buyers increasingly prefer SUV models. This trend reduces demand for subcompact, compact and mid-size cars.

Financed vehicle sales are falling in subcompact and compact segments. Mid-size vehicles buck this trend with growing numbers. HEV vehicles perform best across most market segments. However, subcompact cars show the lowest HEV uptake.

Hybrid Electric Vehicle (HEV) technology performs best across most market segments, indicating growing environmental consciousness among Mexican car buyers. However, subcompact cars show the lowest HEV uptake, likely due to price sensitivity in this segment. Meanwhile, Mild Hybrid Electric Vehicle (MHEV) technology shows limited penetration in the compact segment, suggesting consumers in this category are either sticking with traditional powertrains or opting for hybrid options outright.

What this means for the industry

For manufacturers: The SUV shift creates opportunities to expand product lines in this segment whilst reconsidering investment in declining compact categories. The dominance of financing partnerships means manufacturers need strong captive finance capabilities or strategic bank alliances to compete effectively.

For financial institutions: The 60% financing penetration rate shows room for growth, particularly in underserved segments. Institutions should focus on competitive rates and flexible terms to capture market share from captive finance companies.

For market planning: Hybrid vehicles represent the immediate electrification opportunity, especially outside the price-sensitive subcompact segment. Full electric adoption will require addressing price barriers through incentives or lower-cost models.

Where data helps: Understanding regional financing preferences, segment-specific credit terms, and powertrain adoption rates enables manufacturers and lenders to optimise their strategies. Accurate automotive data reveals which partnerships and product combinations drive the strongest market performance. Contact JATO Advisory and let us help you explore growth opportunities in your market.