Nearshoring: Challenges and opportunities for Mexico’s automotive sector
At this year’s Mexico Nearshoring and Logistics Auto Industry Summit 2026 in Mexico City, where GlobalData participated in the “Automotive Market Forecasts and Industry Trends” panel alongside other leading voices in the market, one theme underpinned nearly every question: whether Mexico can convert its expanding role in North American vehicle production into a durable advantage. In our assessment, the opportunity is both real and structural, but its realization depends on how a set of near-term risks are resolved over the coming years.
The most significant of those risks is trade policy. The US has indicated that it will not renew the United States-Mexico-Canada Agreement (USMCA) in its current form, and while this does not constitute a withdrawal, it does mark the beginning of a period of annual reviews, which is sufficient on its own to complicate long-term investment decisions. The most sensitive issue is the rules of origin, which determine how much regional content a vehicle must contain to remain protected under the agreement. Any material change to those thresholds would put the current supply chain under pressure and could force companies to reconfigure sourcing and production footprints to maintain compliance. That uncertainty is already having tangible effects. For example, a portion of the Toyota Tacoma’s production volume, which is one of Mexico’s most exported vehicles, is being relocated back to the US.
Production came under additional strain in the first half of the year, with output down by approximately 2.1% YoY. The closures of the CIVAC and COMPAS Nissan plants were key contributors to the decline and will weigh particularly heavily on Mercedes-Benz and Nissan. The macroeconomic backdrop further reinforces the need for caution. In collaboration with Oxford Economics (OE), we recorded a 0.6% YoY contraction in Q1, marginally milder than the 0.8% decline previously anticipated, but a downturn nonetheless.
Despite these challenges, meaningful opportunities remain. Mexico emerged from the pandemic with a larger footprint in the regional automotive sector, increasing its share of North American production from 23.0% in 2021 to 26.0% in 2025. While we expect this share to normalize toward 22.0% by 2030, the country will remain a core pillar of the regional manufacturing base, supported by several dynamics that continue to steer production its way. General Motors has confirmed that the Chevrolet Aveo, Mexico’s highest-demand model, and the Chevrolet Groove, which are both currently built in China, will move to Mexico in 2027 to supply local demand. Meanwhile, Stellantis is also adding volume, having launched production of the new Ram 1500 at Saltillo in mid-2025 and the Jeep Cherokee at Toluca in late-2025.
Source: GlobalData
Regional investment is further strengthened by new vehicle platforms coming to North America. Flexible architectures are poised for rapid growth, with their share expected to rise by 8.0 pp by 2028. Much of this expansion will be driven by Stellantis’s STLA Large 1, which can underpin Battery Electric Vehicles (BEVs), hybrids, and Internal Combustion Engine (ICE) models, supported by rollouts such as the next-generation Jeep Grand Cherokee (J6U/L). The recently announced STLA One adds another layer of diversification, supporting multiple powertrains across the B, C, and D size classes that range from Small Cars to seven-seat SUVs, with the Chrysler Airflow slated for Toluca. BMW’s NK1 electric platform, destined for San Luis Potosí, is engineered specifically for the transition to electric mobility, aiming to lower production costs while extending range.
Demand conditions are also encouraging. LV sales in Mexico reached a new record during the first half of 2026, although much of this growth was import-led, with sales of imported vehicles up by 21.0% YoY as regionally built volumes declined by 9.0% YoY. At the same time, the market is broadening in composition. Historically, Mexico has been a Sedan market, which is why models such as the Chevrolet Aveo, Nissan Versa, and Kia K3 remain among the top sellers. However, that mix is now shifting toward SUVs. SUVs reached parity with Cars in 2025 and are projected to move ahead for the first time in full-year 2026, albeit by less than 1 pp. By 2030, we expect SUVs to account for 43.6% of the market, putting them 9.1 pp ahead of Cars.
This import-led growth is closely tied to the rise of Chinese and other Asian automakers, which have been the primary drivers of Mexico’s LV sales expansion. However, this trend now faces a significant headwind: tariffs on LVs imported from countries without a Free Trade Agreement (FTA) have risen from 20.0% to 50.0%. So far, demand has proven resilient. Recent launches such as the Geely EX2 and EX5 have been well received, helped by pre-tariff inventory building and by automakers holding their prices steady. But the strategic response is aligning with what nearshoring dynamics would predict.
In response, some manufacturers are shifting sourcing toward markets with preferential access. Brazil, which is already attracting investment from BYD and Geely, appears to be a likely production base for models destined for Mexico. Meanwhile, other automakers are moving toward local production. GAC Motor has announced plans to shift its operations, and Geely and BYD have both signaled interest, even where some of this activity may be in the form of Completely Knocked Down (CKD) assembly rather than full production. In each case, higher tariffs are converting import share into pressure to localize, which could cause disruptions on the mid-term, but also a likely opportunity for Mexican manufacturing.
Taken together, nearshoring has created a genuine, structural opportunity for Mexico in the LV industry, reinforced by production relocations, the rollout of new platforms, and the localization pressure now building on Chinese brands. The ultimate payoff, however, will hinge on the outcome of the USMCA review process and on a macroeconomic environment that, for now, is sending mixed signals. That balance is what we will be monitoring most closely through the annual negotiations ahead.
Mariana Muriel, Analyst, North American Light Vehicle Sales and Production