Mexico's automobile production industry is arguably one of the most profitable business sectors in the country. An influx of major automobile companies is expanding to Mexico to take advantage of a highly skilled and technically proficient labor force, the North American Free Trade Agreement and the generosity bestowed by the government to attract the interest of foreign organizations.
According to Automotive Meetings, Mexico's vehicle production currently accounts for 20 percent of all manufacturing in the country and 4 percent of its gross domestic product. In addition, this year analysts predict that as many as 3.7 million cars and trucks will be assembled in Mexico.
At present, 11 Mexican states are home to approximately 18 automobile manufacturing facilities that produce 48 different models of light trucks and cars. On the commercial vehicle production front, there are 11 companies that build this automobile type in Mexico and two organizations that build engines to power these vehicles.
There seems to be no slowing down of investments being made to bolster Mexico's vehicle production industry, making it the eighth largest manufacturer of automotive components, vehicle parts and fully assembled cars and trucks.
BorgWarner makes sizeable investment in its Mexican operations
In a recent press release, Michigan-based BorgWarner, one of the world's largest suppliers of automobile parts and equipment, announced that it had recently expanded its facility located in Ramos-Arizpe, Mexico.
This initiative will add as many as 350 new jobs between now and 2017, allowing BorgWarner to satisfy an ever-growing demand for its advanced emissions technologies to North American clients - this includes devices such as coolant control valves, exhaust gas recirculation units, ignition coils and other critical automobile components.
"11 Mexican states are home to approximately 18 automobile manufacturing facilities."
"BorgWarner's advanced emissions and ignition technologies help automakers meet stringent emissions standards while improving fuel economy and engine performance," Brady Ericson, BorgWarner Emissions Systems' general manager and president, said in a press release. "Our expansion in Mexico complements our recent multimillion-dollar investment in Dixon, Illinois. It is an important part of our overall growth and consolidation strategy aimed at serving our customers' growing needs."
BorgWarner manufactured products allow automakers to provide consumers with vehicles that have better fuel economy while lowering emissions, ultimately resulting in a higher level of engine performance, the press release stated. In addition, BorgWarner also produces parts that helps keep overall engine temperatures lower, which also maximizes fuel burn off in vehicles, helping to bolster engine efficiency.
Toyota considering expanding passenger vehicle assembly to Mexico
While many major automobile manufacturing organizations producing passenger vehicles have descended upon Mexico to establish an operational foothold in the country, Japanese automaker Toyota has not. While Toyota currently manufactures its Toyota Tacoma truck unit in the country, it does not have an operation that makes its smaller line of cars. However, the company's stance on moving to Mexico has changed in recent years as many of the organization's competitors have taken advantage of what the country has to offer in terms of vehicle production and are thriving.
According to a report from Reuters, Toyota is in the final stages of settling on plans to build an assembly plant in Guanajuato, the company's first ever in the country. This move will call for Toyota to make an investment of potentially more than $1 billion. It's popular Corolla model will be produced in Mexico as the company sold approximately 340,000 units in 2014, just in the U.S. market.
In January, The Wall Street Journal wrote that Mexico saw a record amount of vehicle production in the country last year, with that number expected to increase significantly in the coming years. Of the more than 3 million cars and trucks assembled in Mexico in 2014, this number is 10 percent higher than what was recorded the year prior, the journal wrote. In addition, of the vehicles manufactured in Mexico, 2.6 million of them were exported out of the country.
Analysts estimate that over the next five years, Mexico could have the capacity to assemble more than 5 million vehicles on an annual basis.
"Mexico without doubt has an automotive sector that is a safe bet," Eduardo Solis, the Mexican Automotive Industry Association president was quoted by the Journal during a recent news conference.
There are a number of reasons why Mexico's automotive sector is growing at a substantial rate. However, consumer demand from the U.S. market may be the biggest.
All told, Mexico's status as a major vehicle producing country will continue to be well-earned as more companies either move their operations there or expand upon their existing facilities, following the example set forth by BorgWarner. Those with interests in the automobile industry should keep a watchful eye over developments happening within the country. This will be necessary to maintain a competitive advantage in the sector.