Automotive Manufacturing

Mexico Ranks 9th in Global Passenger Vehicle Production

Automotive manufacturing in Mexico, and the presence of the passenger vehicle have deep roots in the country.  Cars arrived in Mexico City as early as 1903, while the first actual automotive production was initiated in 1910.  Small-scale, local assembly was undertaken by Renault and Mercedes-Benz for the purpose of providing vehicles to the Mexican government.

After the Mexican Revolution, which lasted for the better part of the decade between 1910 and 1920, Buick was the first car company to formally establish itself to begin automotive manufacturing in Mexico. This occurred in 1921. The Ford Motor Company, which is still a major player in the Mexican automotive industry today, set up its first operations in the country in 1925.M.

Since its modest beginnings in the early part of the twentieth century, automotive manufacturing in Mexico has come to be representative of global quality in production. While recent Word Bank data indicates that manufacturing represented a total of eighteen percent of Mexico’s GDP in 2012, 17.1% of manufacturing GDP was generated by economic activity in the country’s automotive sector. In terms of overall Gross Domestic Product figures, the nation’s automotive industry is responsible for approximately three percent of the total.

Today the automotive manufacturing in Mexico employs approximately three hundred and thirty-five thousand workers, or about 16% of the nation’s manufacturing workforce, at OEM operations, as well as those of their first, second and third tier suppliers.

Automotive manufacturing in Mexico, as is the case with most of the country’s large scale production, has historically concentrated on the U.S.- Mexico border, and in the northern part of the country. On the border Ciudad Juarez is an automotive manufacturing location of choice. The automotive industry in Juarez, along with electrical products sectors, provides almost 60% of all manufacturing jobs in the border city.  Ciudad Juarez is home to industry noteworthies such as Delphi Automotive, Yazaki, Bosch, Valeo, Johnson Control and a myriad of other suppliers to the automotive industry.  Also, in the North of the country, a large automotive industry cluster is situated in Saltillo, in the State of Coahuila. The city is known for the high profile presence of U.S. Big Three automakers and their suppliers.

Automotive manufacturing in Mexico has raised its global profile in recent years as a result of large investments that have been made by Asian and European manufacturers, mainly Japanese and German, in the country’s South Central region. This area encompasses the states of Aguascalientes, Guanajuato, Queretaro, Puebla and San Luis Potosi. As a result of the influx of large amounts of capital into the Mexican automotive sector, the country has recently ascended to the ninth position in terms of volume of passenger vehicle production in the world, and is the sixth largest vehicle exporter. Mexico recently overtook Canada as North America’s number two auto producer, and currently produces one of every six vehicles in North America. It is projected that this ratio will increase by one in four by the year 2020.

Over the last several years relative newcomers to Mexico such as Nissan, Honda, Toyota and Hyundai from Asia, and Audi, BMW, and Daimler AG’s, Mercedes-Benz, have announced and built new operations in Mexico representing aggregate investment of over eight billion dollars US. Mexico is now Nissan’s top production location outside of Japan.  In addition to investment from these firms, companies with long histories in the country such as Ford, GM, Chrysler and Volkswagen plan to invest a collective billion plus dollars to expand their automotive manufacturing in Mexico operations. Increasingly Asian, European and US automakers are utilizing Mexico, not only as a location from which to service North America, but also as an export platform from which to ship finished vehicles and parts to customers at all corners of the globe. This is possible due to the fact that, since the signing of the NAFTA, Mexico has succeeded in assembling a network that enables its products to receive duty free treatment by forty-four nations.

In addition to projected 5.5% annual growth for the foreseeable future, it is projected that the automotive industry in Mexico will be the source of 2.4 million units by 2014.

Image credit: creativity103.com

 

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This quarterly publication will be populated with content that is useful and relevant to readers that are contemplating Mexico investments, have operations already within the Republic, as well as to other individuals that have an interest in Mexico and its manufacturing sector.