News, Insights and Best Practices for Manufacturing in Mexico

Auto manufacturing in Mexico: Past, present and future success

09 May 2016

Category: Automotive Manufacturing, Logistics Management, Manufacturing in Mexico

If you follow recent auto industry news, you'll see a lot of talk about manufacturing in Mexico. Politicians, industry leaders and consumers constantly share their opinions about the advantages and challenges the country holds for business, while more and more major U.S. brands move facilities across the border.

One thing companies should recognize, though, is auto manufacturing in Mexico did not spring up overnight. While there are events - like the election season - that have brought the issue to the forefront, Mexico's commitment to providing the labor and resources necessary to attract foreign partners is built on years of investments in infrastructure, local populations and trade agreements. The end result is a nearshoring option businesses can rely on for future growth.

The past 
 Auto brands around the world have used Mexican manufacturing plants for years. Automotive World reported Nissan Mexico recently celebrated its Ciudad Industrial del Valle de Cuernavaca facility's 50th anniversary. Before moving to Mexico, Nissan only had plants in Japan.

 Infrastructure, local populations, and trade agreements will continue to be the factors that make Mexico great for manufacturing.
Mexico hosts a skilled labor force due to commitment to manufacturing success.

While global businesses have been in Mexico for decades, the country didn't fully attempt to be a world manufacturing leader until the 1990s, according to PricewaterhouseCoopers. During reconstruction of its production market in this decade, Mexico aimed to take advantage of its geographic position and population eager for employment. The country borders U.S. consumers and offers sea ports for other foreign territories. World Finance described how Mexico joined the North American Free Trade Agreement in 1994 and started removing costly tariffs. Now the country has favorable trade conditions with 44 countries, more than most foreign competitors.

Mexico also started building manufacturing communities close to the U.S. border and in other territories with abundant resources. As manufacturing became successful, the government invested in infrastructure so employees could drive to work and business could easily make shipments.

The present
The 2009 world recession slightly slowed Mexico's progress - while affecting numerous other industries as well - but the region has come back strong. PricewaterhouseCoopers says the country is the eighth-largest auto producer in the world and climbing, with major brands like Nissan, Honda, Mazda and Ford opening facilities throughout the region. Most manufacturing that currently takes place in Mexico is for foreign partners. Steel Times International said 80 percent of vehicles produced in the country are exported to other markets, with 7 out of 10 of those exports sent to North America.

"Most manufacturing that currently takes place in Mexico is for foreign partners."

The success of the auto industry fuels economic growth throughout Mexico. Fox News reported the country's gross domestic product rose 2.9 percent in the first quarter of 2016 compared to last year's figure. Specifically, manufacturing and construction saw a 2.2 percent increase.

It seems the trade agreements and labor force serve as a strong incentive for foreign investment in the area. Mexican government programs also work to encourage innovative products and educational facilities to keep the country in pace with future opportunities.

The Future
Labor forces in Mexico are often more affordable than other offshoring options. World Finance described how Mexican employees will soon get new opportunities in the form of white collar jobs as more research and development takes place in the country. Local populations become increasingly educated and businesses can profit from an eager and skillful workforce.

Growth has been consistent in the region for some time but manufacturers may face obstacles. Government investments in manufacturing may plateau as U.S. demand for new facilities slows down. If a company does want to open a new plant in the country, it would be smart to work with a Mexican shelter service that can identify which region currently holds the resources necessary for production.

Related posts