Honda and Mazda are both expanding their plants in Mexico to capitalize on the benefits of manufacturing in Mexico.
Honda is beginning the manufacture of its new Honda Fit, a high-tech vehicle, at its advanced automobile plant, Honda de Mexico, Sociedad Anonima de Capital Variable. The new plant will improve Honda's ability to supply cars to the U.S., according to Automotive World. More than 90 percent of Honda and Acura cars that go to the U.S. are built in North America and are shipped from Mexico to the U.S.
Honda's new plant will increase Honda's supply to 1.92 million units, accounting for 95 percent of the vehicles shipped to the U.S. The plant is located in Celaya, Guanajuato, and cost $800 million to build. It will employ 3,200 workers and the annual capacity will be 200,000 vehicles and engines.
"Our new plant in Mexico is based on the Honda Company Principle of maintaining a global viewpoint to supply products of the highest quality, yet at a reasonable price, for worldwide customer satisfaction," said Takanobu Ito, president and CEO of Honda. "In Celaya, we can see these core values in action, with a commitment to the highest quality and efficiency and a focus on creating joy for our customers."
Mazda is also expanding
Mazda is building its new plant in Salamanca. It will open Feb. 27 2014. According to Auto News, Mazda is adding the factory in order to benefit from the low-cost production base that comes from manufacturing in Mexico. In the past when Mazda manufactured in Japan, the company was battered by the strong value of the yen, which made exporting expensive. In 2012, the company decided to boost their overseas production in order to protect itself from the expenses associated with rising currencies.
"You might say the yen is weak, so why not keep exporting from Japan? But you can't rely on that foreign exchange rate to keep exporting," says Koji Endo, Auto Analyst at Advance Research Japan. "It makes sense to minimize the risk and minimize the cost by going to Mexico. It's a very strategic plant."
According to Auto News, the vehicles built in Mexico will be cheaper and easier to sell in the U.S. It will produce 230,00 units per year beginning next year.
Both auto companies - Honda and Mazda - are taking advantage of the many benefits that come from expanding to Mexico. Not only is it cheaper to build cars in Mexico, but the supply chain to the U.S. is more efficient and it comes virtually tariff-free.