In May, production in the Mexican car industry fell 39.4 percent, while auto exports declined 44.3 percent and car sales dropped 38 percent, all compared to last year's figures, according to the Mexican Association of the Automobile Industry (AMIA) and the Mexican Association of Car Distributors (AMDA).
Furthermore, in the January-May period this year, Mexican auto production fell 41.7 percent year on year, while domestic sales in the same period declined 30.6 percent from a year ago, the worst year-over-year drop since 1994. Mexico's car exports in the January-May period declined 41.5 percent compared to the same period of 2008.
These sharp declines come as a consequence of the international financial crisis which has caused increased unemployment and reduced levels of confidence among consumers and investors.
Mexico's car production has been running at 25 percent of capacity and, along with car sales, has been dropping for the last five consecutive months. Up until April, reports show the closure of at least 40 car dealerships in the country.
The bad news is that the Mexican government has not been able to come up with a plan to help the industry. Further additional contraction in production and sales is expected in the current year, mostly due to the sharp decline in consumer confidence. The AMIA and the AMDA estimate that a recuperation in the automobile industry may not be seen until the last quarter of next year.
Foreign car companies operating in Mexico include General Motors, Ford Motor Co., Chrysler, Volkswagen AG, Nissan and Honda. About 70 percent of cars produced in Mexico go to the US market, according to Reuters. General Motors says that its plants in Mexico will continue to operate for the time being despite the company's recent bankruptcy filing, as the low production and labor costs in Mexico will help bring the company back to profitability. However, a senior US official said that the government would not allow any of the tax-payer money loaned to GM to be used on foreign operations. Chrysler's Mexico plants were idled indefinitely in May.