News, Insights and Best Practices for Manufacturing in Mexico

BMW and GM may make major production impacts in Mexico

19 May 2014

Category: Automotive Manufacturing, Labor & Economics

BMW is considering building a factory in Mexico, where it would produce 3-series and 1-series cars, but it may also build Minis in Mexico, if it chooses to construct a plant there, according to Auto News.

The source reports that German-language newspaper Handelsblatt said executives currently favor Mexico for building its new North American plant, although it hasn't decided whether to build there or in the U.S. One of the benefits for foreign companies building small cars in Mexico is that if the cars are shipped to the U.S., they will pass the border tariff free, and there would be a lower margin on the vehicles. Additionally, Mexican labor is less expensive than U.S. labor, and it is cheaper to build a factory in Mexico.

According to Auto News, a plant built in Mexico would boost capacity for BMW's North American division by 600,000 vehicles.

General Motors is beneficial for the peso
The value of the peso has risen by 3.4 percent in relation to dollars, apparently by virtue of General Motors Co.'s manufacturing output, which increased dramatically along with the rest of Mexico's manufacturing output, according to Bloomberg. 

Manufacturing production in March has been phenomenal for Mexico. In March, manufacturing rose by by 6.8 percent compared to the previous month. Most of the export products in Mexico are shipped to the U.S., and exports have shot up since the dismal winter season when economic stagnation dominated much of the first quarter.

"As long as prospects for a sustained U.S. recovery remain intact, that will support higher growth expectations [in Mexico]", Robert Abad, a portfolio manager who helps oversee $53 billion at Western Asset Management, told Bloomberg. "It looks like we're getting to the point where we're finally seeing the traction we've all been talking about [on growth]."

The U.S. economy is slated to grow by 2.5 percent this year compared to the previous year, according to a survey of economists by Bloomberg. Mexico tends to grow along with the U.S., its biggest trading partner, which means that both countries could see major economic expansion.

According to Mexican President Enrique Peña Nieto, the economy is headed "in the right direction."

Mexico is a great place to build cars. It has many trade agreements with countries all over the world. Many different U.S. companies aside from GM have moved to Mexico, and there is a large automotive industry near the border, where it is easy to ship cars north.


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