Increasing the income tax deduction for car purchases would be possible to boost domestic production and purchasing.

Mexico City.- To boost the production and purchase of cars made in Mexico, the automotive industry believes incentives should be implemented, such as increasing the Income Tax (ISR) deduction for the purchase of new cars.

The executive president of the Mexican Association of Automobile Dealers (AMDA) , Guillermo Rosales , said that the income tax deduction for the purchase of new cars is capped at 175,000 pesos and has not been updated since 2008.

If an immediate income tax deduction could be granted temporarily, it would create a favorable environment for various corporations to allocate [automotive] production in Mexico to Mexico," he indicated.

The deduction is allowed to individuals with business activity or legal entities.

If the car is purchased in cash or financed, the maximum deduction allowed is 175,000 pesos for gasoline-powered vehicles and 250,000 pesos for electric or hybrid cars.

Plan Mexico sets a goal of increasing domestically produced vehicles by 10% . However, for automakers to allocate a greater volume of production to the domestic market, there must be incentives to encourage the purchase of domestically manufactured vehicles.

Rosales commented that they are “lobbying” for a reform to the Income Tax Law , but nothing concrete has been done.

For its part, the National Confederation of Chambers of Commerce (Concanaco-Servytur) presented a proposal to the Ministry of Finance and Public Credit in April to establish a 100% tax deduction for the purchase of vehicles manufactured in Mexico.

The organization's president, Octavio de la Torre, stated that, in the last four years, only 34% of the cars sold in the country were domestic, while 66% were imported.

"Concanaco-Servytur seeks to change this trend by promoting incentives that strengthen national production and boost the domestic market. In addition to the economic benefits, this strategy responds to Mexico's commitments to decarbonization and sustainable mobility," De la Torre commented.

He added that 48% of Mexico's vehicle fleet is over 16 years old, which increases polluting emissions and reduces transportation efficiency. Therefore, the incentive would encourage the purchase of new cars with a transition to clean technologies.

Osvaldo Belmont, technical director of the Mexican Automotive Industry Association (AMIA), said that increasing deductibility for new car purchases is an issue the industry has been promoting for some time.

JRL