Mexican Automotive Industry Booming
With forty-two companies officially represented in the Mexican automotive industry and nearly four hundred different models being manufactured there, Mexico has become one of the most diversified and fulfilled passenger vehicle markets on the globe.
Over the past few decades, Mexico has built a sophisticated and resilient infrastructure making it the 8th largest producer of automobiles in the world, providing well over half a million jobs in the industry. How has the country’s industry accomplished this? The answer is simple. While some countries produce high quality at a high price and other countries can offer low prices for low quality, Mexico has been able to provide a rather high level of quality coupled with a relatively low level of cost.
Although the average wage in the Mexican automotive industry is, on average, well under $4/hour, many of these workers are highly skilled. Currently, Mexico’s institutes and universities graduate 90,000 engineers and technicians each year – more than countries like Germany, Canada, or even Brazil. This unique combination of skill and affordability has resulted in continuous growth in Mexico’s automotive industry over the past few decades and especially the past few years. Last year alone Mexico exported 2.41 million vehicles to over 100 countries. This is further propelled by the extensive network of free trade agreements in place between Mexico and other consumer countries. While the US has free trade agreements with twenty countries, Mexico has sealed similar accords with forty-four nations. Foreign Direct Investment has responded, raising over 3.5 billion USD between 2007 and 2012, with 2013 revealing an explosion in further foreign investment dollars.
Here are a few recent examples of the continuing growth that is characteristic of the Mexican automotive industry:
- Mazda announced at the beginning of 2013 it will invest a total of $650 million into the plant currently under construction in Guanajuato, Mexico with an initial capacity of 140,000 vehicles.
- Nissan just signed a deal with Vesta for the construction of a Douki Seisan Park (DSP) at its new Aguascalientes, Mexico manufacturing plant, which will include five separate buildings on 140 acres. This venture will include further expansion potential in the future.
- DENSO recently announced its investment of approximately $51.4 million to expand its operations at its DENSO Mexico S.A. de C.V. (DNMX) manufacturing facility in Silao, Guanajuato, Mexico and add about 450 new jobs.
- Audi officials recently unveiled a plan to come to Mexico, beginning with a $1.3 billion plant, which will eventually be the German brand’s only global source for its Q5 SUVs after its 2016 opening.
- General Motors just detailed new plans for a $691 million investment to expand its manufacturing operations in Silao, San Luis Potosi, and Toluca enabling them to build higher performing, more fuel-efficient powertrains.
- Earlier this year, Honda announced an initial investment of $470 million to build a brand new transmission plant in Celaya, Mexico, beginning with an annual production capacity of 350,000 units, expected to eventually double.
- U.S. automotive components manufacturer Lear Corp. inaugurated a new production facility in Ciudad Juárez. The US$22 million plant will produce electrical harnesses for auto OEM Chevrol.
Given this level of recent investment, it appears that the Mexican automotive industry juggernaut will continue its expansion for the foreseeable future.