A curious phenomenon is taking place in the automotive market—or, more precisely, in the light-vehicle market. In May, sales in Mexico increased by 5%, while production fell by 4%. For a long time, vehicles manufactured in Mexico have depended heavily on foreign markets. In that month, for example, we produced nearly 343,000 vehicles, while only 127,000 were sold domestically—less than half.
As happens in many markets, Mexico both imports and exports all kinds of vehicles, so this pattern would not be particularly noteworthy except that it appears to reflect a trend driven not by productivity or competitiveness, but by market intervention. On one hand, Trump’s tariff dance has created difficulties for exports of light vehicles to the United States. On the other, the collapse of the Chinese economy (which apparently no one wants to acknowledge) is flooding us with vehicles from that country. In the end, Mexico’s automotive industry is being squeezed. There is no dramatic decline, but there is stagnation accompanied by gradual deterioration.
So far in 2026—that is, from January through May—Mexico has produced 1.642 million light vehicles, slightly fewer than during the same period in 2025. The difference is just over 12,500 units, roughly a decline of 0.8%.
Sales, however, rose from 598,500 units in 2025 to 627,600 in 2026, a significant increase of 5%. But if we look only at vehicles manufactured in Mexico, sales fell from 217,000 to 203,000 units, a decline of nearly 7% over the same period. Imports obviously filled the gap, growing by 11%. Looking only at vehicles originating from China, however, growth was almost double that rate: 22%. During January–May 2025, 117,000 Chinese vehicles were sold in Mexico; during the same period in 2026, the figure was nearly 143,000.
No one knows with certainty why Chinese vehicles can be sold at prices far below comparable models from North America, Europe, Japan, or Korea. I have seen studies arguing that the industry has built a first-rate supplier network in China and is therefore more productive. We also have evidence of subsidies in that country, ranging from a favorable exchange rate to a near-zero cost of capital, which could easily explain bargain-basement prices in international markets.
I believe the second explanation is the more important one. China has faced deep economic problems since the collapse of Evergrande in October 2021. The enormous real-estate bubble that had sustained its economy burst, but China has made an extraordinary effort to conceal the problem—not only from international observers but also from its own population. As a result, it urgently needs to sell abroad the automotive production that can no longer be sold at home.
This week, The Wall Street Journal reported a 22% decline in automobile sales in China. In May, 1.5 million vehicles were sold there—a huge number. But considering that China has perhaps eight times Mexico’s population and a fairly similar per-capita income, the figure becomes less impressive. In May, China exported roughly half as many vehicles as it sold domestically.
I believe Mexico should take developments in the automotive market more seriously, not only because of the figures discussed above but also because of the transition toward electric vehicles. Unfortunately, the government seems more concerned with producing toy-like vehicles based on Chinese technology and presenting them as a “national industry.” Another case in which they simply do not understand what is happening.