News, Insights and Best Practices for Manufacturing in Mexico

Mexico offers central hub for many auto manufacturers

27 Jun 2014

Category: Automotive Manufacturing

Mexico continues to be a major automotive hub, with locations as varied as Aguascalientes and other places close to the U.S. border. Mexico is a great place for auto manufacturers because it allows for tariff-free shipping of vehicle parts from the U.S. into Mexico. Cars can be built from parts in specially designated factories called maquiladoras, which offer tax and government incentives for foreign companies that seek to export their products. Companies can then ship the vehicles tariff free up into the U.S. and into Canada. These tariff-free shipping opportunities are possible thanks to the North American Free Trade Agreement.

Examples of car companies that have moved to Mexico are numerous, but the most recent companies to make the plunge and begin expanding to Mexico are Daimler AG and Renault Nissan, two companies that have agreed to join together to produce Mercedes and Infiniti vehicles in Mexico, according to The Wall Street Journal. They will build in Nissan's factory in Aguascalientes.

One of the reasons cited for the partnership and the move to Mexico was cost.

"This is all about scale," said Arndt Ellinghorst, automotive analyst with ISI Group in London. "It's about lowering costs by sharing the parts of the car that are less relevant to the consumer."

BMW also moving to Mexico
The Journal further said that BMW will announce by the end of July where it will place its new North American factory. Many believe this factory will be in Mexico, although as of yet, no one has been able to confirm this for sure.

LG Innotek creating an auto parts plant in Mexico
Korean auto parts manufacturing company LG Innotek has built its first electric vehicle parts plant overseas, which will be located in Juan del Rio, Mexico - a hub for auto production, according to the Korea Herald.

The planned facility will be huge, spanning 34,000 square meters. The company plans to hire 600 employees to work the factory and begin producing parts by August.

LG manufactures anti-lock brake and power steering systems for other car companies. Because there are so many auto manufacturers in Mexico, this is a great opportunity for the company to connect with car companies there, such as Nissan and Daimler.

"We will boost our global production in Mexico through aggressive investment and continuous efforts to gain a competitive edge," said LG Innotek CEO Lee Ung-beom at a ceremony celebrating the finished manufacturing plant.


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