Over the last several years, the U.S.’s southern neighbor has captured the attention of the a good number of the world’s major passenger vehicle manufacturers. It has become one of the world’s top destinations for foreign direct investment. Automotive investment in Mexico has increased at a healthy clip.
Recently six major automotive OEM’s (Nissan, Mazda, Honda, Ford, General Motors and Audi), have committed significant amounts to initiate or expand automotive investment in Mexico. According to IHS Automotive associate director, Guido Vildozo, “During the first half of 2013, Mexico received an approximate total of $6.4 billion dollars in direct foreign investment in the automotive sector. This amount considers confirmed individual totals from Nissan (US $2 billion), Audi (US $1.3 billion), Ford (US $1.3 billion), GM (US $691 million), Mazda (US $650 million) and Honda (US $470 million).” Since the beginning of the 2000’s, total automotive investment in Mexico has been in the neighborhood of thirty billion dollars. According to Detroit-based Polk Consulting, during the period 2012 – 2013, Mexico captured approximately twenty-two to twenty-four percent of the North American automotive sector’s investment dollars. The U.S. led in automotive investment inflows with sixty-six percent, while the remainder went to Canada. Automotive investment in Mexico is approximately five percent more annually than it was a decade ago.
According to the international business consultancy KPMG, Mexico has been effective at attracting investment by major automotive OEMs due to its network of free trade agreements that have been established with more than forty nations, its geographic proximity to North America’s largest consumer markets and its advantageous manufacturing cost structure.
Automotive investment in Mexico has had significant positive repercussions for the nation, especially in the northern and central regions. These are the places from which export to the United States and Canada can be done with ease, as well as locations from which sales can be made into the Mexican domestic market or to consumers in Mexico’s South American trade partners.
Automotive investment in Mexico has not only brought with the jobs and economic benefits that have been created by OEMs, but has also felt the positive impact of the arrival of Tier 1, Tier 2 and Tier 3 suppliers. According to KPMG, twenty-three of the twenty-five most important Tier 1 suppliers to the global automotive industry have a presence in Mexico.
From an economic development perspective, automotive investment in Mexico has created clusters that include not only OEMs and suppliers, but educational institutions that support the industry by educating young Mexicans to become skilled labor. Mexico graduates one hundred thousand engineers and automotive technicians annually, and its universities and technical schools offer 900 post graduate programs that are related to automotive technology and its development.
It is projected that automotive investment in Mexico will continue a a healthy pace until the end of the decade. Analysts anticipate that of the 18 million automobiles that will be produced in North America in 2020, four million will be made in Mexico.