News, Insights and Best Practices for Manufacturing in Mexico

Hyundai is expanding to Mexico

20 Apr 2015

Category: Automotive Manufacturing

Mexico's automotive manufacturing industry is booming. The country has a well-established reputation for being one of the fastest-growing economies in the world and its vehicle production activity is an overwhelming contributor to this standing. Many foreign automakers are rapidly expanding to Mexico to take advantage of the country's low labor costs and high-quality output of finished goods.

According to a report from Left Lane, Hyundai, an automaker based in Korea, is in the planning stages of building its first vehicle production facility in Mexico. The company doesn't have a manufacturing presence in the country at present, but does have positive sales figures there. Ideally, Hyundai would like the umber of cars sold inside of Mexico to reach 50,000 before greenlighting the construction project.

Bloomberg Business wrote that Hyundai first began selling their vehicles in Mexico last year, to the tune of 12,000 automobiles being purchased by people living in the country. The company believes that it can hit its sales goals within the next three years and if so, will start building its Mexico-based factory once that threshold has been reached.

"Hyundai wants to turn Mexico into a very important base for its global production," Pedro Albarran, Hyundai Motor de Mexico's managing director, told Bloomberg. "I'm sure that over the years we'll see production of Hyundai products in Mexico … Hyundai has very important plans for Mexico."

The company is currently assessing where the home for their new factory will be built. Bloomberg wrote that Hyundai is currently considering Nuevo León. Kia, another automaker based in Korea, is currently building a factory in the state.

According to a report from The Wall Street Journal, Kia's capital investment of $1 billion will allow it to construct an automotive plant in the town of Pesquería. Completion is expected sometime next year with production to begin in May 2016. Once finished, it will be the first factory of its kind in Nuevo León and allow Kia to produce 400,000 vehicles on an annual basis.

As for Hyundai, the company already operates a manufacturing facility in Montgomery, Alabama. Its factory in Mexico will give the organization two production plants in the North American market, allowing it to quickly get its vehicles to consumers in both in the U.S. and Mexico.

Hyundai is considering building a new automotive factory in Mexico in order to take advantage of the low cost skilled labor, as well as the proximity to the U.S.Hyundai is considering building a new automotive factory in Mexico.

Hyundai joins the club
Hyundai is the latest foreign automaker to descend on Mexico. Bidness ETC wrote that Chevrolet would soon begin manufacturing its Cruze compact car in the country. Two years ago, the company pledged $5 billion to expand its manufacturing operations in Mexico, with $350 million being earmarked to produce the Chevy Cruze at its plant in Coahuila.

In a separate report, The Wall Street Journal wrote that Ford would invest $2.5 billion to expand the capabilities of its two factories in the country. In Chihuahua, the company will spend $1.3 billion to build a factory that will manufacture engines to run its vehicles, while $1.2 billion will be spent on a plant that will assemble transmissions in Guanajuato. Once completed, both projects will create approximately 3,800 jobs in both cities.

In a report from Autoblog, the website wrote that Toyota is planning to produce its Corolla model in Guanajuato beginning in 2019. The company is building a $1 billion factory in the city that will produce more than 200,000 vehicles annually.

"This investment represents our long-held principles of continuous improvement and challenging ourselves to always do better," Autoblog quoted Akio Toyoda, president of Toyota Motor Company, in a press release. "An increase in production does not mean an undisciplined pursuit of more. Toyota's expansion must be driven by providing ever-better-cars and our talented people. These investments will be an important test of Toyota's resolve and a measure of tangible improvement."

Foreign automakers expanding to Mexico is certainly not news within the industry. The advantages the country offers - in addition to low-cost, high-quality labor - include the ability to import necessary components into the country and export finished products out, all without being assessed a tariff, is part of the North American Free Trade Agreement through which Mexico has more than 40 established partnerships.

"Mexico's automotive manufacturing industry is booming."

In addition, barriers to entry have also been mitigated considerably. The country's government has made it easier than ever for companies to come in and establish a manufacturing foothold in Mexico. Foreign entities are offered significant tax breaks and these organizations don't always have to make significant financial investments to begin manufacturing products.

These organizations have the option of working through Mexico shelter company, allowing them to partner with a maquiladora as a way to reduce manufacturing costs and get their operations off the ground quickly.

The future of automobile manufacturing in Mexico looks bright, particularly as foreign automakers continue to make such sizeable investments to either build new factories or expand their existing facilities. 

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