News, Insights and Best Practices for Manufacturing in Mexico

Foreign automakers expanding their Mexico operations

12 Mar 2015

Category: Automotive Manufacturing, Labor & Economics, Logistics Management, Manufacturing in Mexico

It goes without saying that the auto manufacturing industry in Mexico is stronger than it has ever been. Foreign car companies are expanding to Mexico at a dizzying pace, trying to capitalize on the economic advantages and technically proficient labor forces the country so proudly boasts.

According to an International Business Times report, Nissan will begin aggressively ramping up its production efforts. The Japanese automaker will partner with Daimler AG, the company that owns the Mercedes-Benz brand, to construct a manufacturing facility in Aguascalientes, Mexico with an expected value of $1.4 billion.

"As many as 3.2 million cars and trucks were built in Mexico in 2014."

Upon completion of this factory, Nissan is expecting to increase its vehicle production output from 800,000 cars to approximately 1.1 million on an annual basis. The new plant is expected to be fully built and operational sometime in 2017 and will employ as many as 5,700 people. Vehicles in Nissan's Infiniti line will be assembled in the factory and in 2018, Daimler will begin manufacturing Mercedes-Benz cars out of the same facility.

"Nissan Mexicana is considered the benchmark for the brand in the world," Airton Cousseau, managing director for Nissan Mexicana, told International Business Times. "It's No. 1 in production [in Mexico] and the first in exports, more than in Japan."

At present, Nissan vehicles represent 25 percent of all cars being manufactured in Mexico. In 2014, the company sold roughly 267,000 vehicles in the country and exported 538,000 cars. Both figures put Nissan atop Mexico's auto sales and export activity.

However, given the overall health of Mexico's auto manufacturing sector, other companies are also expanding their operations inside of the country.

A person's hand is seen holding the keys to a new automobile while the brand new automobile is featured in the background of the pictureMany foreign automakers will begin ramping up their vehicle production efforts in Mexico.

Volkswagen invests $1 billion toward expanding its Mexican auto factory
In preparation for the assembling of the second version in its Tiguan line of vehicles, Fox News Latino reported that Volkswagen is preparing to spend $1 billion on improvements at its factory in Puebla, Mexico.

The company will build upon the technology already in place needed to manufacture its Tiguan sport utility vehicles. In addition, the company is also planning to increase the size of its workforce in its plant by creating 2,000 additional job opportunities.

"Localization has become key to safeguarding our competitive position on the global market and manufacturing the Tiguan in Mexico will bring production closer to the U.S.-market," Michael Horn, CEO and president of Volkswagen Group of America said in a press release. "It is another proof point that Volkswagen is committed to further growth in the U.S. and North American markets. With production of the Golf A7 and the Tiguan now moved to Puebla, we will build approximately 90 percent of our products in the NAFTA region."

The company is expected to begin production of the Tiguan next year and finished vehicles will begin appearing in the U.S. market by 2017.

Audi building factory in Mexico
To compete with BMW for supremacy in the luxury vehicle marketplace, Audi, according to a report from The Wall Street Journal, is in the process of building a manufacturing plant in Mexico. The facility will be used to build the German automaker's Q5 SUV. These vehicles will then be exported to Europe, the U.S. and other foreign markets around the world.

"Mexico is the first big step, but probably will not be the last one," Rupert Stadler, chief executive of Audi told the Journal.

By expanding to Mexico, Audi is essentially confirming that the country's auto production activities are strong and Mexico has made it easier than ever for foreign car companies to house their manufacturing plants within its borders.

IBT wrote that as many as 3.2 million cars and trucks were built in Mexico in 2014. This number represents a 10 percent increase over figures recorded in 2013. In addition, of the 3.2 million vehicles produced in the country, 2.6 million were exported out, with four out of every five being shipped to the U.S.

Those automakers considering a move to Mexico should begin paying close attention to the happenings taking place within the country's vehicle manufacturing sector. Most analysts aren't anticipating a decrease in activity or revenue generation. Therefore, it appears that establishing a presence in Mexico is the only way to maintain a competitive edge in an industry that continues to rapidly expand and get smarter in the way it does business.

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