Strong close of 2024 for automotive sector
Nearshoring increases need for streamlined cross-border transportation
In North America, the automotive sector experienced a record-breaking year in 2024, accounting for over 20% of trade, employed 13 million people, and contributed 17% of global production. Despite facing the threat of tariffs from the new incoming U.S. administration, the Mexican automotive industry is thriving, with production and exports at all-time highs.
Michael Castagnetto, president of North American surface transportation for C.H. Robinson, recently commented in Transport Topics that Mexico will continue to play a critical role in nearshoring efforts despite new concerns about tariffs and U.S. trade policy. Castagnetto emphasized that companies are nearshoring to Mexico not solely to reduce reliance on China, but also due to the integrated nature of the North American supply chain, where cross-border movement is frequent.
Labor strike avoided: Agreement reached
As of January 8, 2025, an agreement was made between the International Longshoremen’s Association (ILA) and U.S. Maritime Alliance (USMX). This agreement came together right before the existing contract extension was set to expire on January 15, 2025.
The uncertainty regarding operations at U.S. East and Gulf Coast ports was particularly impactful for automakers reliant on just-in-time inventory. The National Association of Manufacturers recently estimated that 76% of containerized vehicle exports and 54% of containerized vehicle imports are processed through the impacted ports. Many participants were diverting shipments, and now that the threat of a strike has passed, expect buyers and suppliers to update choices on their routing strategies, particularly returning routing to the U.S. East Coast.
Impact of looming tariffs
With proposed tariffs on all products from Canada and Mexico, the automotive sector could be significantly impacted by cost increases as many critical parts come from these countries. This could mean a substantial increase in production costs and potentially more expensive vehicles for consumers.