Canada has historically been the US’ principal partner in North American passenger vehicle production, lately, however, the Mexico automotive industry has been quickly moving to play this role.
While the United States is still the dominant automotive manufacturer in North America, the tide is turning as to who will be the dominant partner on the continent as regards supplying the US consumer, and other markets. Mexico is winning the automotive manufacturing war with Canada. The Mexico automotive industry is rapidly increasing its production as that of Canada contracts.
By the Numbers
In 2004, Mexico’s share of North America’s overall automotive production was only about 9%. In the next decade, that number doubled significantly to climb to 18.8%. Conversely, Canada’s contribution to overall, continent-wide production was 17% a decade ago. It now stands at approximately 7%. While Canada once had 20 manufacturing facilities turning out automobiles in high volume, the northernmost NAFTA nation now has only half that number. Yet the number of plants that comprise the Mexico automotive industry continues to grow steadily. Mexico now manufactures approximately one out of five vehicles built in North America. Experts predict that the Mexico automotive industry will be responsible for the production of one in four by 2020. Currently, over three million units roll out of Mexico’s passenger vehicle manufacturing plants each year.
This shifting balance is nowhere more evident than in the amount of investment pouring into the Mexico automotive industry from companies around the world. According to the Center for Automotive Research in Ann Arbor, Michigan, 2014 alone saw the announcement of $18 billion in additional automotive investment for North America, $7 billion of which went to Mexico while only $750 million went to Canada. Nearly every major automaker is placing its bets on Mexico. For instance, the ramping up of operations are underway or scheduled at Mexican facilities run by General Motors, Ford, Toyota, Honda, Audi and BMW.
What is driving this increase in automotive production and jobs in Mexico? What is making Mexico so attractive to automakers today? A number of factors contribute to Mexico’s success:
- Labor cost is still low: While labor continues to rise dramatically in China, Mexico is seen as the favored offshore – or nearshore – partner, due to only a gradual rise in labor costs.
- Mexican workers typically build cars for $5-$10 an hour. In Canada and the US, due to a cost structure that is affected by a different set of variables, the cost of fully burdened labor is $50-$60 an
- Skill sets are advancing: Mexico has invested heavily in vocational training and technical education to create what is now prized as a highly skilled workforce in the automotive industry, as well as in others.
- Mexico has more free trade agreements than its neighbors: While Canada, the US, and Mexico are all part of the NAFTA free-trade agreement, Canada has relatively few other trade agreements in place. The US has about 20, whereas Mexico has a voluminous 45 agreements in place that give its exports preference in a wide range of consumer markets around the world, including the European Union, in its entirety, and Japan.
Remember, interested parties can receive Mexico manufacturing information on a weekly basis by SMS Texting the word Tecma to 96000.