A ship carrying 4,000 Volkswagen-brand vehicles – as well as Porsches, Audis and Lamborghinis – from Germany bound for North America sank in late February. The event would have been a blow to the Mexican subsidiary, at a time when cars are scarce due to the global semiconductor crisis, except for one thing: Volkswagen no longer sells German-made cars in Mexico.
Until a decade ago, the German manufacturer imported from its country of origin 10% of the cars it sold in Mexico. But as the German manufacturer reconfigured its product portfolio, incorporating new SUVs, it decided to introduce models to Mexico from other supplier countries such as India or Brazil.
Today, Volkswagen’s entry-level models – such as the Vento, Virtus, T-Cross and Nivus – come from these two markets. The intermediate models, the Jetta, Taos and Tiguan, are made locally, while the larger and more expensive Teramont and Cross Sport come from the United States.
Volkswagen and India
India has become a key supplier of Volkswagen vehicles in Mexico. The Vento subcompact sedan, which is the brand’s best-selling model in the country, has been imported from India since its introduction in 2013.
“Vento is our best-selling model. T-Cross is taking a significant volume”, says Edgar Estrada, director of the Volkswagen brand in Mexico.
India is the largest supplier of cars to Mexico. In 2021, manufacturers imported 116,572 units from that country, of which a third were Volkswagen models. Other manufacturers that brought Indian-made models in 2021 were the Hyundai group (Kia and Hyundai), Suzuki, Ford and General Motors, according to data from the Mexican Association of the Automotive Industry.
This year, Volkswagen will also begin to bring its entry-level T-Cross SUV from that country, which it initially imported from Brazil. At the end of February, a first batch of 1,232 Volkswagen T-Cross units left the port of Mumbai, India, bound for Mexico.
The German brand is not the only brand that has decided to do without the models produced in its country of origin in order to have a better cost structure and shorter delivery times. Renault has also followed a similar path.
Renault and South America
The brand of French origin brings 99% of the cars it sells in Mexico from Colombia, Brazil and Argentina.
“This strategy allows us to offer the best product proposal at the most competitive price,” says Magda López, president of Renault in Mexico.
The Kwid model, for example, comes from Brazil. This model represented 40% of the brand’s sales in 2021, according to AMIA data. The Duster subcompact SUV, Renault’s second best-selling model in Mexico, is assembled in Colombia, while the Oroch pickup, Renault’s third best-selling model in Mexico, also comes from Brazil.
Brazil positioned itself in 2021 as the fifth largest vehicle supplier for Mexico, with 95,027 imported vehicles. In addition to Renault, other manufacturers such as Volkswagen, General Motors, Stellantis, Ford and Honda imported models from the South American country.
Mitsubishi and Thailand
Mitsubishi has also reduced its imports from Japan to make way for vehicles produced in the Asia-Pacific region, such as Indonesia and Thailand. 85% of the models that the Japanese brand imported to Mexico in 2021 came from Indonesia, while 12% came from Thailand.
“If we had left it in Japan we would have had more shortages (of vehicles in 2020) and perhaps we would have been more impacted by the volatility in the exchange rate,” says Jorge Vallejo, president of Mitsubishi in Mexico.
Thailand was in 2021 the sixth largest vehicle supplier for Mexico with a volume of 51,210 units shipped, of which 18% were imported by Mitsubishi. The rest correspond to models from Toyota, Honda, General Motors and Stellantis.
Relocating models away from their home countries has allowed Japan, Renault and Volkswagen to source models amid global shortages of semiconductors.
“The South American region has been less impacted by the shortage of chips,” says López. This is because in this region, as in India, Thailand and Indonesia, platforms of segments A and B are produced, which correspond to small entry models and with fewer chips than larger and more expensive ones.
Jorge Vallejo, from Mitsubishi, is clear about the benefit: “This transition (importing more models from emerging economies and less from Japan) allows us to source from a market more similar to ours, have more product availability and more launches.”
