Automakers Cut Investment in Mexico as Electronics Gain Ground in Exports

Mexico's automotive industry recorded another decline in foreign direct investment (FDI) during the first half of 2026, amid the review of the United States-Mexico-Canada Agreement (USMCA), shifts in US trade policy and the sector's technological transformation.

Between January and June, companies manufacturing cars, trucks and auto parts attracted US$4.285 billion, a 11.2% decrease from the same period in 2025. It was also the lowest level recorded for a first half since 2022.

The result follows a decline recorded the previous year and marks the second consecutive year of falling investment in the automotive sector.

Factors cited to explain the decline include uncertainty over the future of the USMCA, trade conditions imposed by the United States and tariffs on steel, aluminium and vehicles. The industry is also undergoing technological changes, particularly the shift towards electrified vehicles and the transformation of manufacturing processes.

University of Texas A&M researcher Luis Foncerrada said companies in the sector continue to tie investment decisions to trade arrangements between Mexico, the United States and Canada. He also said that although new investment has declined, plants operating in Mexico continue to carry out maintenance and expand existing production lines.

According to the analysis, automotive companies are allocating resources to maintain and expand facilities already operating in Mexico while awaiting clarity on the future conditions of regional trade.

The USMCA review is one of the factors companies are considering in their long-term projects. Decisions on new plants, capacity expansions and changes to supply chains are linked to the conditions that will shape trade between Mexico, the United States and Canada.

The sector is also being affected by US tariffs on various industrial products. In vehicle manufacturing, steel and aluminium are among the inputs used in production chains, while vehicles made in Mexico are primarily destined for the US market.

The decline in automotive investment coincides with increased participation by other manufacturing activities in foreign capital flows into Mexico.

Manufacturing of computing equipment and electronic products has expanded its share of Mexico's exports. In 2025, overseas sales of computers, peripheral equipment, communications, audio and video products, electronic components, and measuring and navigation instruments totalled US$145 billion, according to figures cited in the analysis.

During the first months of 2026, electronics surpassed transport equipment in the value of Mexico's exports, according to data and estimates cited by specialists. Electronics shipments are expected to reach about US$200 billion this year.

The sector's growth is linked to international demand for servers, artificial intelligence infrastructure and other technology components. The expansion of these activities is also changing the composition of Mexico's exports.

However, Mexico's electronics industry remains heavily dependent on components from Asia. Taiwan, China, Malaysia, South Korea, Vietnam and Thailand are among the main suppliers of these inputs. They include processors, high-bandwidth memory, accelerator cards and integrated circuits used in technology equipment.

Taiwan accounts for 44.1% of the electronic component imports cited in the analysis, followed by China at 10.4%, Malaysia at 9.8%, South Korea at 8.5%, Vietnam at 8.4% and Thailand at 5.7%.

Mexico's Economy Secretariat has highlighted the need to reduce dependence on Asian inputs during negotiations related to the USMCA and efforts to strengthen production chains in North America.

Meanwhile, Mexico's automotive sector retains a broad industrial base, with vehicle manufacturing plants and an extensive network of auto-parts suppliers. The industry also maintains a positive trade balance in vehicles and auto parts, according to data cited in the economic analysis.

The decline in FDI during the first half of the year is therefore taking place as companies maintain production operations and invest in existing facilities. New capital flows have become less concentrated in car, truck and auto-parts manufacturing and have increased their presence in electronics-related manufacturing activities.

Investment and export figures also show a shift in the composition of manufacturing sectors receiving foreign capital and participating in Mexico's foreign trade. Against this backdrop, USMCA decisions, trade costs and technological transformation are among the factors automotive companies are considering in their production and investment plans.