(Bloomberg) -- BMW’s Mexico chief expects anemic sales in the country’s auto market next year, hurt by expected peso weakness against the dollar and subdued economic growth as US President-elect Donald Trump ratchets up trade tensions.
Overall Mexican new car sales will likely remain little changed in 2025 after double-digit gains this year, BMW Group Mexico Chief Executive Officer Diego Camargo said in a phone interview. The luxury vehicle market is seen “maintaining its volume” after posting likely growth of 0.5% to 1.5% in 2024, he said.
Threats from Trump to impose 25% tariffs on goods from Mexico and an additional 10% tariff on Chinese imports is adding to underlying uncertainty about the outlook for Mexico’s economy and currency, he said.
The potential for a wider trade war, including protectionist measures by Mexico, could also impact demand, Camargo noted. Previous tariffs imposed by Mexico on steel and aluminum imports from countries with which it didn’t have trade agreements had an inflationary effect that rippled throughout the automotive supply chain, he said.
BMW’s cross-border trade may get caught in that crossfire. About 30% of BMW’s sales in Mexico are SUVs imported from a factory in South Carolina, according to a company spokesperson. The carmaker also exports an unspecified number of vehicles made in Mexico to over 80 different destinations, including the US.
Analysts in Mexico have been quick to revise down their economic growth predictions for next year following mounting trade tensions. The country already is expected to see a fourth straight year of diminishing economic growth and potentially steep levies from the US could impact nearly 11% of its gross domestic product, according to an estimate by Bloomberg Economics.
BMW Group’s sales in Mexico, including its BMW and Mini branded-cars grew 1.1% in the first 10 months of the year, to reach 13,893 units, according to data from the Mexican Association of Automotive Distributors. Last year, the German brand sold 17,703 vehicles in the country, compared with the record 362,244 vehicles it delivered in the US.
BMW produces three models locally from its San Luis Potosi vehicle assembly plant — the BMW 3 Series, 2 Series Coupe and the M2. But its current manufacturing capacity is limited to 175,000 vehicles a year.
While Trump’s tariff threats loom large over the auto industry, Camargo said BMW has benefited from Mexico’s extensive global network of free trade agreements that go beyond those with the US and Canada.
He also noted that BMW is one of the few companies selling electric vehicles in Mexico’s nascent but growing EV market for all-electric cars. Last year, EVs accounted for 22% of the brand’s total sales in the country.
The German automaker’s commitment to electrification includes an 800 million euro ($844 million) investment in a new battery facility near its San Luis Potosi factory, which will enable local production of a next-generation EV known as the Neue Klasse by 2027.
In August, BMW announced a partnership with Mexico’s Vemo, a startup offering electric vehicle taxis through Uber Technologies Inc.’s local app. BMW customers have access to Vemo’s network of more than 500 charging stations and BMW is installing 144 new charging points in 20 locations through the country.
“We have 42 points of sale and all of them sell electric vehicles, they all have chargers and qualified personnel to diagnose, receive, and repair these cars if needed,” said Camargo. “So we are ready for deployment.”
--With assistance from Wilfried Eckl-Dorna.
©2024 Bloomberg L.P.