News, Insights and Best Practices for Manufacturing in Mexico

Major incentives available for building cars in Mexico

14 Jul 2014

Category: Automotive Manufacturing

The benefits of auto manufacturing in Mexico are enormous. According to Hispanic news site Voxxi, BMW's decision to build its $1 billion factory there was the right choice. Mexico already has a large base of industrial support for the automotive industry, with many companies that build parts for different kinds of vehicles. Additionally, thanks to the North American Free Trade Agreement, sending cars back and forth between the U.S. and Mexico is completely tariff-free.

Mexican officials also welcomed BMW's decision.

"With this investment, Mexico is stepping up to premium-level production of global vehicles," Minister of the Economy Ildefonso Guajardo said.

Kia is also considering expanding to Mexico
Another company that is considering a move to Mexico is Kia, which is thinking of putting its next overseas plant in that country, according to Automotive News. Last month, Reuters reported that the company planned to break ground in Monterrey to build a factory with the capacity to produce 300,000 vehicles. The manufacturing plant would begin by producing two different kinds of compact cars. However, nothing about Kia's decision has been made official yet.

"Kia Motors Corp. is currently evaluating various options for the establishment of a new overseas manufacturing plant in order to secure future growth for the brand," Kia said in a statement. "As a part of these efforts, and to better cope with the ongoing supply shortage situation in the Americas region, Mexico is being considered as a possible location of our next overseas production facility."

Kia is currently finding it difficult to keep up with U.S. demand for its vehicles, and a plant in Mexico would greatly improve its ability to maintain an adequate supply in the U.S. market.

Mexico makes more cars than Brazil
Mexico and Brazil are often compared with each other. Brazil is the biggest economy in Latin America, and Mexico is the second largest. But Mexico is expected to become the biggest automobile manufacturer in Latin America, according to Marketplace. So far, the country has been making more cars than Brazil throughout 2014, and it will likely continue this pace until the year is over, making this the first time Mexico beats the Brazil in auto manufacturing.

"Audi, Nissan, Mazda, GM, Ford and many, many others," said Shannon O'Neil, a senior fellow for Latin America studies at the Council on Foreign Relations. "These are the types of firms where you've seen huge growth and innovation and productivity among Mexican workers that have made it really a competitive sector."

Mexico is close to the U.S., making transportation easy, and building on a maquiladora in Mexico offers many incentives. A maquiladora is a special kind of factory that has different zoning rules from other manufacturing sites in Mexico. It is given tax and government incentives to build, but everything it makes must be exported out of the country. It is intended largely for foreign companies to expand to Mexico and hire Mexican workers to help boost the country's economy.

Mexico home to the next generation of great engineers
Technology company Metalsa has announced plans to begin training high school students from Latin America, including Mexico, in technical skills and professional development. The company will take on 130 trainees this year in an effort to train 7,600 students by 2020.

The company plans to find students with a high degree of potential and bring them to its training facilities, where it will provide specialized training in math, physics and science. The company will also support teachers in Latin America. It will look at students in low-income communities first, in order to bring down the barriers to entry for beginning work in engineering.

Metalsa will work with Mexico's Department of Education and other groups to bring this project to fruition. It is likely the company will do this in part to support the growth of Mexican engineering and manufacturing.


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