The Mexican port is struggling with the growth of the automotive industry

With the port of Lázaro Cárdenas flooded with car imports, Toyota is looking for alternative entry points for its new Prius model. This is an ominous sign for the auto parts movement as Mexico’s auto industry is through the roof and demand for vehicles is strong in both Mexico and the US.

Toyota plans to bring around 3,500 units of its new Prius model to Mexico before the end of the year and has set a target of delivering around 500 per month. However, Lázaro Cárdenas is being inundated with auto imports from other Asian countries to the point of saturation, the automaker’s local logistics experts noted.

The Association of Mexican Automobile Dealers (AMDA) has warned that the country’s ports are congested with car imports, particularly the Pacific gateways.

Lázaro Cárdenas was the hardest hit port in the Pacific. According to GoComet, there are two days of traffic delays in the port. AMDA has signaled that the issues cannot be resolved immediately, so operational measures have been implemented to mitigate the impact.

Last year vehicle traffic in the port increased by 33.8%. Of the 280,314 cars imported into Mexico by sea in the first four months of this year, 169,953 entered the country through Pacific gateways, with 142,203 coming through Lázaro Cárdenas.

Up until about five years ago, most vehicle imports to Mexico crossed the land border with the USA or the Gulf of Mexico, but this figure is now shifting to the Pacific coast. Last year, about 70% of imported vehicles came from Asia, 18.8% of which came from China.

To avoid congestion in Lázaro Cárdenas, Toyota looked for alternative routes in Acapulco and Mazatlán, but the prospects are not promising. Both ports require investments in infrastructure to be able to handle the increasing traffic, the logistics managers concluded.

Vehicle throughput in Mazatlán increased from 2,384 cars in 2021 to 27,181 last year.

The port’s congestion raises concerns about Mexico’s ability to handle rising flows of auto parts and other traffic, as companies view the country as a prime candidate for nearshoring. Auto parts production in the country has risen to record levels, well above pre-pandemic volumes. March broke through $10 billion a month and the National Auto Parts Industry (INA) expects production to hit $112.7 billion this year.

There’s more to come. Investments in the auto parts industry in Mexico totaled $398 million in the first quarter, according to INA Director General Alberto Bustamante. Two-thirds of this money came from the US, followed by Germany with 27.2%

The lion’s share of the parts flows moves across the US border. The USA accounts for 88% of exports, followed by Canada with 3.7%. On the import side, the USA leads the way with 54.6%, followed by China (13.6%), Japan (6.4%), Germany (5.8%) and South Korea (5.4%).

The demand for new vehicles is strong. Auto sales in Mexico rose 21.37% in the first five months of this year. North of the border, General Motors and Ford recently signaled stronger-than-expected demand in their home market, and US vehicle production has risen back close to pre-pandemic levels.

BNSF sees a promising opportunity. The Class I railway company recently set up a dedicated operations design team focused solely on improving “automobile speed and customer experience.” The company says it managed to increase speeds by 14% in the current quarter while handling a record volume of car traffic.

The delays at Lázaro Cárdenas are also causing headaches for shippers of other goods. The newly merged Canadian Pacific Kansas City railroad has marketed its network reach to Asian shippers, highlighting the Port of Mexico as a gateway to the USMCA market. With congestion in Lázaro Cárdenas and normal operations at US West Coast gateways, these customers may find the new alternative less promising.

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