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The automotive industry isn't new to Mexico. In fact, according to an industry report in MexicoNow magazine, Ford Motor Co. put in its first assembly lines in 1925, and the industry has grown ever since. MexicoNow reports that Mexico's Light Vehicle production rose from 1.8 million units in 2002 to 2.9 million units in 2013. Projections show light vehicle production rising to a total of 4.4 million units through 2020, with approximately 3.7 million of those units slated for export.

Clare Goldsberry

April 28, 2014

3 Min Read
Mexico's automotive industry growing at a fast pace

A recently released survey by the Entrada Group, a manufacturing services firm located in Zacatecas, Mexico, offering assistance to companies wanting to establish facilities in Mexico including shared shelter services, shows that Mexico is becoming increasingly desirable as a manufacturing location to serve the Americas region. And it's not just large manufacturers that are locating in Mexico. Sixty-nine percent of the respondents to the Entrada Group's survey are under 500 employees; 14% have 501 to 2000 employees; 8% have 2000 to 5000 employees;and another 8% have more than 5000 employees. Eighty-two percent of the respondents are privately held companies, and 55% have two or more manufacturing locations.

Seventy-three percent of the respondents to the survey are headquartered in the U.S., and 95% manufacture products delivered to customers in North America. When asked in which low-cost location they are currently manufacturing, 51% said they currently manufacture in China; 36% are currently manufacturing in Mexico; 27% are currently manufacturing in other Asian countries; 24% currently manufacture in India.

While China remains the number one low-cost manufacturing location, that trend is beginning to shift, as many companies that left Mexico for China are returning to be close to their customers in the North American market.

Respondents replied that the most important factor when seeking low-cost production destinations is "Low Operation Costs," which tops "High-quality Production Standards" by a 2:1 margin (11%). Other factors considered for a low-cost production site are "customer needs requires us to be close" (27%) and "reliable, cost-effective supply chain" (14%). Thirteen percent cited "proximity to North American markets." All but 3% stated they'd achieved their low-cost goals to a "large" or "moderate" extent.

The 2013 North American Plastics Industry Study performed by Plante & Moran, also revealed that Mexico is garnering a greater level of interest from U.S.-based companies. "There is a related increased level of expansion and migration of plastics companies into Mexico," writes Jeff Mengel, Leader, Plastics Industry Team, and Ted Morgan, Co-leader, for Plante & Moran. "Tooling companies, crane companies, and other supporting businesses are slowly but surely starting to expand or set up operations."

The automotive industry in Mexico is that country's "leading economic engine, contributing over 20% of the total manufacturing industry's GDP and over 3.5% of its overall GDP," according to the MexicoNow report. The automotive industry also employs nearly "15% of the total industrial labor and boasts the highest wages in the manufacturing sector."

Automotive industry projects in Mexico slated for 2014 total an estimated 75 in 16 states. Most active is the State of Guanajuato. SRG Global just announced an expansion of its injection molding, chrome plating, and assembly plant, more than doubling its existing space. That is just one of 15 projects by automotive manufacturers including General Motors (a $349 million investment for a new transmission plant); Denso ($51.4 million expansion for alternators); Mazda ($770 million investment for Mazda3 sedan and engine production), and Volkswagen ($118 million investment for new engine configurations).

Some companies are expanding or siting multiple facilities. For example, Daimler is expanding its truck assembly plant in Nuevo Leon with a $20 million investment and investing another $45 million in a truck assembly plant expansion and equipment updating in Estado de Mexico. In addition to the new GM transmission plant in Guanajuato, GM is expanding its Toluca complex with a $211 million investment.

There are a lot of reasons that Mexico has attained top ranking in low-cost manufacturing, and it's more than just competitive labor rates, a "network of free trade agreements, a dollar based manufacturing platform, and proximity to the North American markets," notes MexicoNow. It's also about the "global production capacity which currently stands at about 82 million units, and is expected to grow to about 103 million by 2020."

About the Author(s)

Clare Goldsberry

Until she retired in September 2021, Clare Goldsberry reported on the plastics industry for more than 30 years. In addition to the 10,000+ articles she has written, by her own estimation, she is the author of several books, including The Business of Injection Molding: How to succeed as a custom molder and Purchasing Injection Molds: A buyers guide. Goldsberry is a member of the Plastics Pioneers Association. She reflected on her long career in "Time to Say Good-Bye."

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