North America is one of the biggest regions for automotive manufacturing, and Mexico is leading the way to an even stronger North American auto industry. With Canadian and U.S. businesses offshoring to the country, according to Reuters, Mexico is quickly becoming the top supplier of autos in North America. The country's auto industry is so strong, Reuters reported even Japanese and German manufacturers are beginning expansion efforts in the country. From upgrading their maquiladoras in Mexico to employing more specialists, companies are enhancing their manufacturing in Mexico.
And it's paying off. According to Auto News, the North American output in September for car and truck production increased year-over-year by 14 percent, with Mexico leading the way in car fabrication and assembly. Auto News reported Mexico's car output rose 15 percent, compared to only 12 percent in the U.S. While the U.S. auto industry also made great gains in September, Reuters reported the auto industry in North America may see the strongest improvements thanks to Mexico.
The importance of Mexico to the North American industry
According to Reuters, manufacturers in Mexico are set to begin building and enhancing their factories, which will be an overall investment of $10 billion. Although Mexico is already a major player in the global auto industry, Reuters reported new plants by some of the industry's biggest automakers may propel Mexico further into the spotlight. Mexico currently produces one out of every six vehicles in North America, but by 2020 IHS Automotive, a research firm, estimates it may fabricate as many as one out of four autos in the region, Reuters reported. With ongoing investments in the country, Mexico may see production skyrocket nearly 62 percent by 2020, according to IHS Automotive data.
Mexico's popularity as a top offshoring destination is a major factor in the country's success.
"It's all about lower production costs and lower export costs," Michael Tracy, principal at the Agile Group, told Reuters. "Now, everybody is targeting Mexico."
With the country's more affordable labor and short supply chains, manufacturing in Mexico presents a significant opportunity to reduce manufacturing costs for U.S. and Canadian businesses. Yet Mexico's workforce also specializes in manufacturing, especially regarding auto parts and assembly. This expertise gives Mexico an edge over other offshoring destinations, and as more manufacturers offshore to the country, Mexican employees' specialization in automotive manufacturing is only going to advance and provide greater benefits to North American companies.