Chinese Imports and their Impact on the Spare Auto Parts Market in Mexico
Lourdes Álvarez*and Liliana Cuadros **
Date submitted: February 24, 2011. Date accepted: October 7, 2011.
Abstract

The aim of this paper is to examine how the spare auto parts market in Mexico is being affected by the introduction of Chinese auto parts. The trade deficit between Mexico and China in the auto parts subsector has increased in recent years and Chinese car parts belong to a supply strategy that has seen the set-up of companies to lower manufacturing costs, open new lines and avoid product shortages. This is necessary in a spare parts market growing at an annual rate of 10% where there has been an important increase in makes and models, creating a need for companies to specialize. However, quality and performance standards of the auto parts introduced to the country do not exist, there are piracy issues and the auto parts on the market are perceived as being of bad quality.

Keywords:Bilateral trade, Mexico-China, spare parts market, Chinese auto parts.
INTRODUCTION

In the last twenty years the People’s Republic of China has achieved accelerated development in its automotive and auto parts industry. Currently, China has the capacity to manufacture all types of vehicles, and its production volume increased from 222,000 to 18.3 million units between 1981 and 2010 (Fourin, 2005; OICA, 2010). Its growth rate in this industry is unprecedented, even in comparison to the growth occurring in the United States in 1950 or in Europe or Japan in 1960 (Freyssenet, 2009).

Initially, automotive production in China was for domestic consumption, but the export of Chinese auto parts has been increasing since 1990, especially high-tech products (Jenkins and Dussel, 2006). This is associated with the country’s government plans and industrial policy, which have supported growth in automotive production and exportation as an incentive to economic growth (Álvarez and Sepúlveda, 2006; Álvarez, 2007; Dussel, 2010a; 2010b).

During the last five years there has been an increase in the introduction and commercialization of Chinese auto parts in the Mexican spare auto parts market. For this reason we are interested in learning more about the dynamic of these imports, how the subsector that supplies the spare parts market is operating in light of these events, and the level of acceptance for these products in the Mexican market.

The Mexican spare auto parts market and its suppliers’ subsector have not been studied extensively. In this project, both a document-based study and a field study were conducted. First, research conducted on bilateral trade between Mexico and China was reviewed, with special emphasis on an analysis of auto parts imports and using the comtrade map database.1 Then, field work was initiated, with interviews structured for understanding the sector’s problems. Five experts were interviewed on two occasions: first in 2009 during the economic crisis, and then at the beginning of 2011 after a period of recuperation in the sector. Based on the information obtained, a questionnaire was formulated and applied on each occasion to a random sample of 56 companies selected from the directory for the Association of Representatives of Importers and Distributors of Spare Auto Parts (Asociación de Representantes de Importadores y Distribuidores de Refacciones Automotrices—ARIDRA) to verify whether they sold Chinese auto parts and their opinion regarding these auto parts.

This article is structured in three parts. In the first part we analyze Mexico-China auto parts trade, particularly focusing on Mexican imports and the situation for the auto parts sector in China, where it is clear that the government intends to continue promoting the growth of auto and auto parts exports. In the second part, we describe the structure and characteristics of the spare parts market in Mexico. Contrast is drawn between the opinions from experts in 2009 and later in 2011 on the problems in the market and the impact from Chinese auto parts. Also, results from the surveys with auto parts companies are analyzed. Lastly, we present our conclusions.

* Professor at the “C” level in the School of Accounting and Administration at the UNAM, Mexico. Email: malvarez@correo.fca.unam.mx

** Instructor in Administration and Fiscal Advisory Services. Email: liliana@yahoo.com.mx

1 See comtrade map at: http://www.trademap.org/Product_SelProduct_TS.aspx