Supply chain strategies in Mexico
Priorities to propel the Mexican supply chain forward
In the face of trade disruption and regulatory convulsions across the North American automotive industry, carmakers including Nissan and Toyota are looking for certainty and direction from government while working on strengthening their supply chains.
The North American automotive industry is desperately looking for certainty after a year of tariff turmoil and disruption to its existing trade agreement, which some fear is risking the region’s competitiveness on the global stage. The sector is exposed to regulatory instability and constitutional reform, as well as uncertainty on the direction of the US-Mexico-Canada agreement on trade (USMCA). In Mexico this is hampering effective planning, including for the supply chain. What is needed to propel the automotive forward in Mexico stronger direction on regulation, redirection on trade policy and an effort to develop infrastructure and technology.
Speaking at this year’s Automotive Logistics & Supply Chain Mexico conference, Lizette Gracida, senior director of external affairs and trade compliance at Toyota México, said that certainty was the magic word. “We need clear rules and no sudden changes that disrupt our industry,” she added.
That is not what has been happening. Mexico is looking at changes to it customs law, tax code, the implementation of the Electronic Value Manifest (E2) and the potential increase of tariffs on countries with which Mexico has no free trade agreements. The E2 is a new digital platform, coming in on December 9, which replaces the old manual system and mandates importers to submit detailed valuation data before goods arrive. As with the non-FTA tariffs, this is part of customs law reforms in the country.
There are also constitutional reforms to the Amparo law, which seeks to protect individuals from abuse of authority by state powers.
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“What the [automotive] industry requests of the government is that it provide regulatory predictability, meaning that we have workable rules and realistic timelines so that the industry and the OEMs can really operate under true legal certainty,” said Gracida.
USMCA compliance
Gerardo de la Torre, regional senior director of supply chain management at Nissan Group of Americas, said that the renegotiation of USMCA and tariff uncertainty were disrupting the automotive sector’s ability to plan, making it impossible to assess competitiveness or predict where things are going.
He said that Nissan has ensured compliance according to USMCA rules to export vehicles from Mexico to the US thanks to multiple actions taken together by design, purchasing, supply chain, manufacturing and logistics.
Furthermore, Nissan has developed a digital tool to provide suppliers with an efficient way to give submit their certificates of compliance. These digital tools were expanded from not only compliance on regional value and labour value content (RVC and LVC), but compliance with the Transport and Refined Number (TRN) data (that required on the Certificate of Origin). Offering efficient solutions for suppliers to demonstrate that they can comply with the rules is important to Nissan, according to de la Torre. “With this type of collaboration with suppliers we have seen a tremendous and positive response,” he noted.
Lizette Gracida said that Toyota México has been working diligently with its suppliers since the USMCA entered into force back in 2020 but admitted that work is time consuming and an administrative burden. “We understand that it is fundamental to campaign and to guide our suppliers, first on having a full understanding of the new requirements, and to implement the correct processes to ensure compliance and help them in case that we notice something that is not going well,” she said.
Toyota is complying with every single requirement of the USMCA and its suppliers have been working hard to do similar and the carmaker is on track thanks to the strength of its collaboration with the supply base.
Ian Slaven, vice-president of global sales and vertical lead for automotive at logistics provider Kuehne+Nagel, said that the politicisation of the trade deal is dangerous. He added that when the tariffs were introduced, lobbyists from the automotive sector were immediately sent to Washington DC to impress upon the government how the lifecycle of component can mean travel across borders multiple times. He added that there were a few senior leaders in the auto industry that clearly stated that the tariffs were not going to be a good thing, indicated what the impact would be to the sector and the competitiveness of the US, Mexico and the whole region.
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“We have to all understand that while we are separate countries, we're one region, we're three neighbours together,” said Slaven. “If you want a solid community that can withstand the test of time, you have to look inward with each other and understand how we move together faster and further.
Supply chain transparency
Nissan is also looking at collaborative initiatives to improve its supply chain and that involves working with purchasing teams on how localisation efforts can extend beyond tier one suppliers down to the tier n suppliers of raw materials.
The automotive sector in Mexico needs to operate as an integrated cluster that offers companies potential synergies and make the sector more competitive together, according to de la Torre. Unfortunately, the sector is fragmented. It needs to be more cohesive for the supply chain. Mexico also needs to remain competitive in all the regulatory requirements in the automotive industry, said de la Torre.
“There is a lot to be done in recovering our rule of law not only for the automotive industry, but the entire society,” said de la Torre, adding that companies needed reassurance that investing in Mexico brings benefits for profitability.
Ian Slaven picked up the importance of planning, and said it is paramount if a company is to meaningfully scale and deliver a product that the customer wants. There needs to be clarity on regulation to plan if the automotive industry in Mexico is to have any hope of prospering.
“If you're unable to realise the market potential and continue to push the product forward, you're not going be able to reinvest… in the countries where you're building the vehicles, the parts, the road transport, the warehousing or the customs,” he said.
On the question of compliance with regulations, Slaven explained that has leaned more heavily into customs and trade consulting and is providing consultancy to help understanding of what technology companies are using today and what problems they had historically.
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“We also look at where we handle the customs brokerage, again combing through the data and looking at where have we seen fractures in the process or inefficiency relative to the amount of time that it's taken to achieve the desired outcome,” explained Slaven. "Then we analyse down further and ask why did this happen?”
Nissan relocation
Looking at competitiveness in 2026, Nissan’s de la Torre explained how Mexico operations fit into the right-sizing of production capacity as part of its global recovery plan called Re:Nissan. According to de la Torre, Nissan is shifting vehicle production from the Civac Plant
in Cuernavaca to Aguascalientes. That means all vehicle production in Mexico will move to the Aguascalientes complex during fiscal year 2025 (ending March 2026), and operations will stop at the Civac Plant in Morelos. Nissan’s main priority now is to reset all of its supply chains for this manufacturing change, according to de la Torre.
“This is part of a very important strategy about right sizing our capacity, but increasing our manufacturing capacity. Plant utilisation ratio is of course necessary to respond to all of this external uncertainty.”
Nissan will export to many Latin American countries and the carmaker wants to become more competitive on cost and profitable.
De la Torre said that Nissan has launched new vehicles in Mexico and is launching new vehicles in Brazil, while building capacity and local utilisation in the US to comply within the tariff benefits there. He said all of this activity provides opportunities to use Mexico as an important export hub not only for Nissan, but for all of its suppliers and partners. That brings with it the priority of supply chain compliance and mapping, as well as ongoing considerations on human rights, cybersecurity prevention, and investment in digital technology. He said Nissan is focused on making its supply chain resilient and increasing its delivery capabilities, as well as recovering profitability.
At Toyota México, Gracida said the priority is to be a more resilient company and with that also have a supply chain that generates this collective resilience. “There are many external factors that impact our business and we need to be able to be stronger to tolerate such factors while maintaining efficiencies and competitiveness,” she said.
Powertrain technology alternatives
Stronger competitiveness also relies on localisation of materials and critical parts in North America. Gracida said there is room to localise semiconductor production and projects are already underway between the US and Mexico to develop local supply for chips.
Regarding critical minerals, Gracida said if China chooses to ‘weaponise’ them in the trade war with the US and with the west more widely, as we have seen in the past weeks, maybe what the west should do is to reconsider its technological strategy for the future.
If it doesn’t, she said the west will always depend for such materials from China but recognised that in North America there is very limited availability of these materials and it would take a decade or more to develop and process materials to produce an EV battery. Gracida said that the if the priority to decarbonise and the technology chosen to do so relies on materials that are produced in China then maybe it is time to rethink the technology being used to decarbonise. She said for companies that don’t have the technology or the materials it may be worth considering alternatives, such as hydrogen.
Slaven said that there was history to the withholding of critical minerals, as China did something similar to Japan in 2018 and the response for North America now is not just a case of diversification in terms of technology but of sources for the materials used in that technology. For Slaven it comes down to policy and foreign direct investment, “how to help other regions of the world that may have some of what we need to produce it into the market”. He said it is important to pay attention to global trade developments and scenario plan based on the information.
Step in the right direction
Looking at what needs to be done next, Nissan’s de la Torre said Mexico needs to correct the direction it is taking on trade negotiations for the benefit of overall North American competitiveness because that was what North American trade agreements were meant to achieve as far back as the original Nafta deal.
“What is being revealed in these latest events is that the North American region lost competitiveness,” said de la Torre.
He said that other countries are already executing very important long-term strategic plans to improve competitiveness. He pointed to China’s domination of the ports. De la Torre said that right now, Mexico, the US and Canada have a unique opportunity to improve their alignment and move in the right direction. He said that the region has the ability to develop its own critical materials and critical technology including semiconductors. If they don’t align, the region will become more fragmented and collaboration will become critical to survive.
Lizette Gracida identified three clear imperatives on which the Mexican government needed to focus: a stronger rule of law; the development of infrastructure, including ports, roads and clean energy; and an answer to the non-trade issues with the US to make the best out of the renegotiation of the USMCA.
“We can start a good renegotiation of the USMCA since the agreement is a cornerstone of the Mexican economy and my wish for next year would be certainty for the auto industry,” she said.
