Chocolate cars

Mexico looks to legitimise used cars being illegally imported from the US.

Andrés Manuel López Obrador (“AMLO”), President of Mexico, signed a presidential decree to legitimise cars illegally imported from the US, locally known as “autos chocolate”. The aim of the executive order is to maximise the fiscal profits from autos chocolate circulating in the country. Last year, the import of autos chocolate increased by 36%.

“This is politically irresponsible,” explained an executive at the National Autoparts Industry (“INA”), “Legitimising autos chocolate is making the illegal, legal. This action will bring thousands of vehicle units into Mexico, the majority are being considered as waste in the US and worthless by insurers.”

“This action will bring thousands of vehicle units into Mexico, the majority are being considered as waste in the US and worthless by insurers.”

Executive, INA, Mexico

The Mexican Association of Automobile Dealers (“AMDA”) opposes the measure arguing that it will result in a price increase of 20% of national vehicles, increase pollution levels and more traffic accidents. A Director of AMDA told us, “Illegally imported cars have been a problem since the 1970s. The legitimisation of these cars undermines a sector that contributed almost USD 90 billion of foreign currency to the Mexican economy and is responsible for more than 2 million jobs.”

“Illegally imported cars have been a problem since the 1970s. The legitimisation of these cars undermines a sector that contributed almost USD 90 billion of foreign currency to the Mexican economy.”

Director, AMDA, Mexico

The decree will also affect second-hand car dealers who see the measure as promoting unfair competition. Legal experts have said that, if approved, the legitimisation of autos chocolate would impact the sale of 6.2 million second-hand cars. These estimates are based on similar measures passed by the government in 2006 and 2009 which resulted in a significant drop in sales of second-hand cars.

Consequently, AMDA has filed an appeal against the decree, pressured by Mexican second-hand car dealers such as Kabak, Wanacar, Automexico, AutoDel, Seminuevos, TuCoche and Autocosmos. At present, international stakeholders have not adopted a common position regarding the presidential decree.

The AMDA Director was concerned about his industry, “There are three major challenges facing the Mexican automotive industry: the transition to electric vehicles, the lack of investment in logistics and communications infrastructure and the lack of specialised human resource for the new automotive era. Flooding the market with old cars from the US is not going to help us tackle any of these issues.”

The INA had similar concerns, “The automotive industry in Mexico has been in crises for five years and the pandemic has accelerated its problems: production, export and domestic sales are all in decline. Policies like this are backward and could seriously damage the sector.”

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