Recent data from the automotive market in Mexico is signaling strong growth for manufacturing in the nation. The Wall Street Journal cited data from the Mexican Auto Industry Association which found that production of vehicles - light trucks and cars - increased in the past year by nearly 2 percent compared to 2012. Total output reached 2.93 million units, however, the number of vehicles exported even outpaced production values. In fact, the number of automobiles shipped to other countries hit 2.42 million, which is just under a 3 percent increase during the same timeframe. Reuters went on to explain that these numbers reflect the fourth consecutive year that Mexico has set records for producing and exporting vehicles.
Mexican auto production continues to improve
A significant portion of the credit can go toward increased offshoring by Asian companies who have expanded to Mexico to improve production and distribution, as well as mutually beneficial trade agreement between Mexico and its neighbors in the region. Nearly 70 percent of the vehicles exported arrived in the U.S., according to The Journal. Eduardo Solis, president of AMIA, explained that Mexico is currently the fourth largest exporter of automobiles across the globe, and the increasingly attractive attributes of manufacturing in Mexico are drawing in new foreign stakeholders in the auto market.
For example, Asian auto-manufacturer Mazda, as well as European brands Audi and Volkswagen have each increased their investments in Mexico to build upon the strong manufacturing sector the country has worked to establish. For brands entering the market, many have been drawn to manufacture in Mexico because of low costs to produce components and goods, and their relatively new arrival in the manufacturing industry in the country has made it difficult to predict output for the coming year, Solis indicated.
International partners help to spur growth
As Mexico's primary trading partner, the U.S. received nearly 1.7 million automobiles, which is a 9.5 percent increase over 2012, according to Reuters. Meanwhile, exports to Canada also increased substantially over the previous year, with the number of vehicles shipped to Mexico's North American partner reaching about 195,000 units, which is a 21.7 percent rise. The strong ties among nations participating in the North American Free Trade Agreement have made across-border distribution and manufacturing less costly than offshoring production overseas and help promote collaboration between multinational businesses. Looking forward, AMIA President Solis anticipates Mexican auto output to hit 4 million vehicles by 2017 as a growing number of manufacturers aim to improve logistics and supply chain management.
In an effort to promote Mexican-made vehicles, the government is working to make it more difficult for car dealers to import older and lower-quality used cars from the U.S. by increasing the level of inspection of foreign imports, wrote The WSJ. At the same time, the domestic demand for vehicles will likely continue to rise as a greater proportion of Mexicans are looking to own vehicles. The number of new cars sold in the nation increased 7.7 percent, and nearly 50 percent were imports.
As more companies offshore production in Mexico, international businesses will need to make sure they understand the manufacturing and financial regulations to do so successfully.