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Chip Shortage Accelerates SUV Sales in Mexico

The SUV and crossover segment was the only one to see sales growth in January

Sport utility vehicles have grown their market share from 29% to 35.3% in Mexico, becoming the main segment.
February 15, 2022 | 10:00 AM

Mexico City — Sport utility vehicles (SUVs) are consolidating their position as the preferred option for Mexican motorists, amid the reconfiguration of automakers’ production lines due to the shortage of microchips.

The SUV segment, which also includes minivans and crossovers, was the only one that recorded sales growth in January in Mexico.

The number of units sold rose 17%, compared to January 2021, according to data from national statistics bureau INEGI.

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“It is no longer just circumstantial, but it is consolidating as a structural issue driven by supply, and greater competition among manufacturers in this segment,” Guillermo Rosales, executive president of the Mexican Association of Automotive Distributors (AMDA), said at a recent press conference.

In contrast, total new car sales fell 3.7% in January to their lowest level since January 2012.

The shift toward SUVs is generating a drop in the market share of compact car sales.

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In January 2021, compact car sales accounted for 21.2% of the total, while in January of this year the figure dropped to 16.2%, while SUVs increased their share from 29% to 35.3%, becoming the main segment.

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Supply and Competition

According to Rosales, increased competition among manufacturers in the SUV segment, with products across the entire price range, is one of the factors behind the shift in trend.

The other factor is related to the impact of the short supply of components, mainly the shortage of chips, and manufacturers’ dilemma regarding where to place their components.

Automakers are opting for SUVs, which are performing better, and which has not only been noticeable in the Mexican market, but also in the U.S. and Canada, markets to which a large part of Mexico’s automotive production is exported.

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One example of this reconfiguration is Nissan Motor, one of the leading carmakers in Mexico. During its quarterly financial results conference call on February 8, Nissan executives highlighted the performance of its pickup trucks and SUVs in the U.S. market.

“We saw even stronger growth in the U.S. midsize pickup truck market,” said Ashwani Gupta, Nissan’s CEO, during the conference call with analysts and investors.

Nissan highlighted the market share gained by its Frontier pickup and Rogue and Pathfinder SUVs in the U.S.

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Frontier, with a 13.1% share in the U.S. segment, gained 7.2 percentage points in market share the past quarter, Gupta said.

Recently, Nissan announced a reconfiguration of production at its CIVAC plant, located in Mexico’s central state of Morelos. It shut down the operation of production line number 1, where it produced the Versa and V-Drive compacts, to move production of them to its plant in Aguascalientes state.

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The CIVAC plant will now focus on its production line 2, where it produces the NP300 and Frontier models, Nissan said, in a strategy shared via email in late January.

An End to Supply Constraints

Chip supply limitations have brought complications to the automotive industry, and not only in Mexico but also in the majority of international markets.

Investments that began to be made last year to increase capacity in Asia and other parts of the world, such as the U.S., could begin to bear fruit in the second half of 2022, according to a note from Fitch Ratings.

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“The addition of state-of-the-art capacity that began construction in the first half of 2021 will help alleviate supply constraints for end markets, including automotive and industrial,” the ratings agency said in the note.

As a result, automakers such as General Motors have expressed their expectations of “solid” results, given the improved outlook for the semiconductor situation in the US and China.

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With respect to Mexico, General Motors plans to start up a plant in 2023 that is currently being reconfigured for the production of electric vehicles.

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