Industria Nacional De Autopartes, A.C.

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2 VISION: Being the most important Organization representing companies in the automotive parts sector with manufacturing interests in Mexico. MISSION: Supporting growth and sustainable development of its members through the promotion of the global market and manufacturing of automotive and auto parts industry in Mexico. GOAL: Leaning on the importance of the sector and the companies that comprise it, to achieve the best representation with government authorities (with special emphasis on the federal government), the automotive sector, academia and society in order to promote growth and development of auto parts industry in Mexico. Industria Nacional De Autopartes, 2 A.C.

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4 INA has created a group of working with various associations of the automotive sector in mexico with this, we can achieve a better representation of mexican automotive sector. INA has cooperation agreements with associations worldwide

5 Present and Future of the Supply Chain in Mexico

6 1. International Perspective Industria Nacional De Autopartes, A.C.

7 Production of vehicles in the World, Industria Nacional De Autopartes, A.C. Annual average rate of growth, Global Markets 2.8% Developing Markets 4.8% Source: IHS Global Insight

8 Units Industria Nacional De Autopartes, A.C. Production Export/Domestic Market Ratio, 2013 Mexico exports up to 81.7% of its vehicle production output, therefore it becomes important to understand its free trade agreements network. China USA Japan Germany South Korea India Brazil Mexico Canada France Spain UK Czech R. 81.7% 87.2% 73% 88.7% 77.6% 88.5% 82.5% 70.7% 17.2% 13.9% 52.1% 19.1% 4.7% Domestic Exports 0 5,000,000 10,000,000 15,000,000 20,000,000 Source: ProMexico with information from OICA, Global Trade Atlas, ANFAVEA, AMIA and CAAM

9 Advantages in costs of manufacturing production Mexican cost production is 10% lower than USA Lower cost of production than USA Higher cost of production than USA Source: Boston Cosulting Group

10 2. Mexico Perspectives Industria Nacional De Autopartes, A.C.

11 Automotive and Auto parts GDP Automotive and Auto parts GDP, Anual Average Rate of Growth, * *Rates were calculated between third quarter of 2011 and 2014 Source: INA with information from INEGI

12 Light Vehicle Production in NAFTA Region EUA 63% Canadá 10% México 27% Mexico 10% Mexico 17% NAFTA = 18.6 Millones de unidades *From data from AMIA for Mexico and OICA for USA and Canada. From forecast from IHS Global Insight. Source: INA with information from AMIA, IHS Global Insight and OICA

13 Production of light vehicles in Mexico Industria Nacional De Autopartes, A.C. + 50% Source: INA with information from AMIA

14 Exports of light vehicles per region 2002 vs 2014 Total 2, % 4% 9% 10% Total 1,312 15% 85% 71% Source: INA with information from AMIA

15 Balance Trade of Automotive Sector Industria Nacional De Autopartes, A.C. Source: Mexican Central Bank (BANXICO). * Automotive includes: motor vehicles for the transport => 10 people; tourism cars; vehicles for transportation of goods; Chasises with engine; Bodies; vehicle parts and accessories; and motorcycles.

16 Forecast of Light Vehicle Production in México, Forecast of production of light vehicles in Mexico, (units) OEM Nissan 683, , , , ,069 General Motors 670, , , , ,662 Volkswagen 554, , , , ,607 Chrysler 417, , , , ,425 Ford 456, , , , ,676 Honda 251, , , , ,748 Mazda 178, , , , ,283 Toyota 71, , , , ,398 BMW ,000 Audi 0 72, , , ,837 Infiniti ,237 49,863 46,708 Mercedes Benz 19,071 68,836 73,554 Fiat 67,014 24, KIA 10, , , ,000 Total 3,352,567 3,747,824 4,249,895 4,546,199 4,895,967 Source: IHS Global Insight Source: INA with information from IHS Global Insight

17 Light Vehicle Sales in Mexico per OEM Source: INA with information from AMIA

18 Production and exports of heavy vehicles, Industria Nacional De Autopartes, A.C. + 60% Source: ANPACT

19 2.1 Mexico Auto Parts Perspectives Industria Nacional De Autopartes, A.C.

20 Most important manufacturers are located in Mexico The location of the most important auto parts around the world strengthens Mexican productive chain. Main auto parts manufacturers in Mexico Origin of the auto parts manufacturers located in Mexico 4% 4% 18% 19% 27% 29% USA Japan Germany France South Corea Other Source: ProMéxico

21 Auto parts production by country 2013 Industria Nacional De Autopartes, A.C. During 2013 Mexico was the sixth largest producer of auto parts in the world with a production value of 76.8 billion dollars Forecast for Mexico by Billion dollars Source: ProMéxico with information from Global Insight and INEGI.

22 Million dollars Industria Nacional De Autopartes, A.C. Auto Parts production, January-October 2014 Jan-Oct 2013 Jan-Oct 2014 Source: INA with information from INEGI

23 Auto Parts Production Source: INA with information from INEGI, AMIA and IHS Global Insight

24 Auto Parts Production per State, Jan- Oct 2014 (includes engines and transmissions) Bajio Zone 28% Source: INA with information from INEGI

25 Auto Parts Production per State, Jan-Oct 2014 (includes engines and transmissions) Bajio Zone 28% 3.1% 14.2% 18.6% 10.4% 5.6% Border Zone 53.4% Baja California Sonora Chihuahua Coahuila Nuevo Leon Tamaulipas Guanajuato Queretaro San Luis Potosi Aguascalientes Jalisco 5.6% 6.7% Source: INA with information from INEGI

26 Production of Auto Parts per System, January- October 2014 Source: INA with information from INEGI

27 Employment in Auto Parts Sector Source: INA with information from INEGI, AMIA and IHS Global Insight

28 World Trade of Auto Parts 2013 Mexico is the 5th largest exporter / importer of auto parts on a global level Countries Exports 2013 % Countries Imports 2013 (million dollars) (million dollars) Germany 130,898 15% USA 145,996 17% USA 93,151 11% Germany 95,532 11% China 81,936 9% China 49,161 6% Japan 74,705 8% Canada 44,579 5% Mexico 57,833 7% Mexico 38,897 5% South Korea 41,474 5% United Kingdom 37,314 4% France 39,197 4% France 34,364 4% Italy 32,263 4% Spain 30,443 4% Czech Republic 26,830 3% Russia 27,161 3% Rest of the world 303,547 34% Rest of the world 336,207 40% Total 881, % Total 839, % % Source: ProMéxico with information from Global Trade Atlas

29 Mexican Exports & Imports of Auto Parts per Country, 2014* Exports and Imports of Autoparts, 2014* Country Exports % Country Imports % USA 55, % USA 21, % Canada 1, % China 4, % Brazil % Japan 2, % Germany % Canada 1, % China % Germany 1, % United Kingdom % South Korea 1, % Japan % Brazil % South Korea % Nicaragua % Thailand % Taiwan % Nicaragua % Italy % Total 61, % Total 39, % Balance Trade 21,686.0 * Forecast to 2014 Source: INA with information from Global Trade Atlas

30 Mexican exports and imports of auto parts in selected countries, 2013 (Excludes USA) Industria Nacional De Autopartes, A.C. Source: INA with information from Global Trade Atlas

31 Main Auto Parts Exported, 2013 Main auto parts exported by Mexico, Auto Parts TOTAL 2012 TOTAL 2013 Growth (Million USD) ( Million USD) (%) Harnesses 4,981 5,970 20% Seats for vehicles and their parts 3,993 4,531 13% Airbags (security system) 1,177 1,452 23% Radio-broadcast receivers, including those with bluethooth and USB ports 910 1,164 28% Electric conductors of copper, aluminum and their alloys for a voltage not exceeding 80v 934 1,101 18% Automatic gearboxes % Catalytic converters % Drive axles with differential, whether or not provided with other transmission components and their parts % Steering wheels % TOTAL EXPORTS 52,054 57,833 11% Source: INA with information from Global Trade Atlas

32 Main Auto Parts Imported, 2013 Main auto parts imported by Mexico, Auto Parts TOTAL 2012 TOTAL 2013 Growth (Million USD) ( Million USD) (%) Wires and cables of copper, aluminum and their alloys 1,616 1,786 10% Seats for vehicles and their parts 1,082 1,222 13% Tires 1,659 1,630-2% Harnesses % Engines for Vehicles, cylinder apacity between 1,000 cm % Parts for steering system, including columns (except axles) % Mechanisms for disc brakes and their parts, including booster and its parts % Seat belts and retractors devices and their parts % Driveshafts and crankshafts % TOTAL IMPORTS 36,431 38,897 7% Source: INA with information from Global Trade Atlas

33 3. Program to Develop the Domestic and Export Market. Strategic Program of the Automotive Industry: 2020 Vision

34 Program Vision The vision of the Mexican Automotive Industry is integrated by two main axes: 2020 Reach a domestic market size of new vehicles that promotes new investments in the sector. Turn Mexico to the top three world destinations for design and vehicle manufacturing, as well as auto parts and components.

35 It was agreed to work on 4 pillars : Pillars of the Program 1. Strengthening of the domestic market STRATEGIC PROGRAM OF THE AUTOMOTIVE INDUSTRY 2. Improve the business environment for the Automotive Industry 3. Access to foreign markets 4. Research, technological development and innovation

36 1st Pillar of the Program Industria Nacional De Autopartes, A.C. Regulate the imports of used vehicles 1. Strengthening of the domestic market Modernize the total in-country vehicle population (vehicle inventory) Achieve target of new vehicles sales

37 Action Items Regulate the imports of used vehicles Apply emission norms to imported used vehicles. Apply physical/mechanical conditions test to imported used vehicles. Strengthen legal regulations on the imported used vehicles. Source: INA with information from AMIA and AMDA

38 Action Item Modernize the total in-country vehicle fleet/population Promote a light vehicles scrapping program to remove 100,000 vehicles per year Light vehicle inventory Source: KASO y Asociados Achieve target of new vehicles sales Promote legal/adm changes to facilitate collateral enforcement by banks/lenders in case of defaulting leases/credit.

39 2 nd Pillar of the Program Development of National Suppliers 2. Improve the business environment for the Automotive Industry Assure human resources quality & quantity Promote competitive incentives for investment

40 Certification Programme ISO / TS Industria Nacional De Autopartes, A.C. Main Objective Quality Certification to auto parts manufacturers who wish to be providers of a Tier I or an OEM. Support Auto parts manufacturer Tier I, Tier II y Tier III. Benefits It provides 50% of the total cost for certificationiso / TS

41 3rd Pillars of the Program Market diversification 3. Access to foreign markets Maintain, defend, review and improve existing agreements

42 Mexico s Free Trade Agreements European association of Free trade Iceland, Liechtenstein, Norway and Switzerland European Union North America USA and Canada Triangle of the North Honduras, El Salvador and Guatemala Japan Pacific Alliance Colombia Chile Peru Mexico Source: Mexican Ministry of Economy

43 Trade of Light Vehicles between Mexico and Brazil, Source: INA with information from AMIA

44 Trade of Auto Parts Between Mexico and Brazil, Source: INA with information from Global Trade Atlas

45 4 th Pillar of the Program Improvement of human resources 4. Research, technology development and innovation To strengthen and improve technological infrastructure Incentives to technology projects

46 Main OEM s and Tier One Supplier with Design Engineering Centers in Mexico Enterprise Number of Engineers FORD 800 Chrysler 500 General Motors 600 Volkswagen 600 Nissan 700 Delphi 1,500 Continental 700 Faurecia 300

47 Investment in research and development in selected countries Source: AT Kearney with information from OCDE and CONACYT

48 Thank You Ing. Oscar Albin President Industria Nacional de Autopartes Industria Nacional De Autopartes, A.C.