Why Mexico Is Speeding Past Brazil in Cars

Remember in the 1990s when some Cassandras feared the North American Free Trade Agreement would someday help Mexico eclipse car production of its higher-cost rivals north of the border? Two decades later, Mexico is making its move, but against another competitor: Brazil.

The country is poised to overtake South America’s largest nation as the top Latin American automobile producer for the first time in more than a decade. Mexico’s ascent is fueled in part by auto sales running at the fastest pace in almost eight years in the U.S., its largest market. The boom coincides with a slump in Brazilian production through June as its domestic demand cools.

“People talk about the energy and telecom industries in Mexico, but the auto industry is going to continue as the icon of this country,” says Luis Lozano, lead automotive partner at PricewaterhouseCoopers in Mexico City. Passing Brazil, where output has fallen 17 percent this year, would vault Mexico to No. 7 among the world’s auto producers. China is No. 1, followed by the U.S.