Mexico isn't a manufacturing leader because businesses choose to build one plant in the country - it's a top offshoring destination because manufacturers continually expand their presence in the country. Manufacturing in Mexico provides North American companies with the best of both worlds: the affordability of offshore manufacturing and remaining near end markets. Nearshoring allows manufacturers to take advantage of offshoring's low cost manufacturing benefits while keeping supply chains short and product quality high. Businesses are continually investing in their Mexican plants, choosing to expand maquiladoras and build new plants.
One of the most recent expansions is by General Motors, which recently announced plans to build a new factory in central Mexico and enhance its current operations. According to Reuters, GM has been producing vehicles in Mexico for 78 years, and it already owns four factory complexes that employ 15,000 people in the country. Its expansion plans include investments in its current plants and the construction of a new one, which will cost the company $349 million, according to Reuters. While GM is also set to improve its U.S. plants, Mexico's well-educated workers and close proximity to U.S. consumers are benefits GM has long understood. In total, the company is investing $691 million to expand its manufacturing in Mexico.
GM's recent move represents just one of the latest expansion investments. Chrysler recently announced its own plans to build a new plant in the country, and, according to The Wall Street Journal, Honda expanded its production capacity by constructing another assembly facility in the country a few years ago. The Journal reported investing in expanding Mexican operations is a great way for businesses to see increased profits from manufacturing in Mexico.
Some manufacturers choose to offshore to Mexico independently. Taking this route is rife with challenges, and it can be difficult to expand operations in Mexico without assistance. Mexico is a low-cost manufacturing environment, but building another maquiladora in the country independently can be expensive for businesses.
Shelter companies allow manufacturers to retain complete control over the manufacturing process, but aid companies in choosing maquiladora locations and employing experienced workers. Expanding operations in Mexico requires manufacturers to not only build a new plant, but also recruit and retain additional employees. Even the most experienced companies can have difficulties successfully expanding within the country, and shelter companies can be the solution to this issue.