Authorities in Mexico have proposed legislation to legalize around 18 million so-called “carros chocolates,” or chocolate cars – vehicles illegally imported into the country from the United States.
If the proposed legislation passes, it would be a blow to the Mexican automotive industry, which relies heavily on global supply chains from U.S., European and Asian producers to make cars.
Guillermo Rosales, deputy director general of the Mexican Association of Automobile Dealers (AMDA), said that sales of new cars could decline by 30% over the next three years if the legislation passes.
“The fall in sales would reduce tax collection,” Rosales said in an interview with Mexico Auto News. “Going from 1.3 million cars in 2019 to 900,000 cars sold by 2021. This year alone, total vehicle sales will generate $55 billion pesos.”
The legislation passed through Mexico’s Chamber of Deputies (similar to the U.S. House of Representatives) on October 19. However, the Mexican Senate rejected the bill on October 22.
The chocolate cars legislation will be taken up for review again in Mexico’s Chamber of Deputies in eight months, according to Deputy Manuel López Castillo, who pushed for passage of the legalization.
“The cars are already here, tell me if the [United Nations] Army or what power will be able to take them out and send them, where are you going to send them? The cars are already here. I think it would be a very favorable solution to be legalized,” Castillo said last week in the Chamber of Deputies.
Around 1,500 vehicles are illegally brought through the U.S.-Mexico border everyday. Illegal cars can be obtained for as little as US$200 to US$300 in Mexico. Popular models sold illegally in Mexico are Ford, Chevrolet, Dodge and Nissan, according to a report in Periodico El Mexicano.
Many of the 18 million illegal cars are in Mexico’s northern cities and states, such as Nuevo Laredo, Ciudad Juarez, Tijuana, Reynosa, Matamoros, Piedras Negras and Ciudad Victoria.
Critics of the illegal cars said they are a drain on the economy and also pose a safety hazard, since they are completely unregulated.
Meanwhile, sales of new cars in Mexico have been in decline the last two years. In September, 100,734 new cars were sold in Mexico, 12.1% fewer compared to September 2018, according to Mexico’s National Institute of Statistics and Geography.
Rosales of AMDA said politics have played a part in the declining sales of Mexican cars, given the uncertainty over the ratification of the United States-Mexico-Canada trade agreement, among other political and economic factors.
“We are not able to stabilize the behavior of sales; the phase of decline continues. Political changes, its influence on the economy and complications in the international order have influenced so that this situation does not appear,” Rosales said in an interview with Forbes.