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Arriba, Arriba, The Automotive Industry Speeds Up its Investments in Mexico

By: Mark Morley


Source: http://www.gxsblogs.com/morleym



 

When I was growing up, one of my favourite cartoons featured a Mexican mouse called Speedy Gonzales and his adventures with Sylvester the cat. At the time this represented one of my first indirect introductions to Mexico and at about the same time (during the early seventies) the automotive industry in Mexico was relatively small in comparison to today’s industry. So once again and for the purposes of this blog entry I am taking an interest in Mexico, but this time from an automotive industry perspective!


The earthquake in Japan in 2011 has proven to be a turning point for the global automotive industry.  After years of globalisation, the industry is now being more cautious over its global expansion plans.  Due to the significant disruption caused by the earthquake, many automotive companies started to review their global manufacturing strategies.  Some markets such as China will continue to see inward investment due to the increasing wealth of the Chinese consumer, but what about other markets around the world?  In an earlier blog I discussed how the Inovar Auto directive in Brazil was helping to grow the domestic automotive industry in the country but what does the future hold for one of its closest competitors, from an automotive manufacturing perspective, Mexico?


 

I think it is amazing that one single event such as the Japanese earthquake can have such an effect on the global automotive industry and as a result ‘near shoring’ has started to appear as the key automotive strategy for 2012.  North America has seen significant inward investment over the past twelve months with some saying that Detroit is likely to return to being a profit centre once again. But another growing profit centre is Mexico. So why are automotive companies rushing to build plants in Mexico?, why has the country become such a hotbed of automotive related investments over the past year? Today’s automotive industry seeks manufacturing locations that offer: low labour costs, high quality, good infrastructure, access to markets, reduced shipping time and costs, and an educated, skilled work force.  Mexico actually ticks most of these boxes!


So time for some facts on Mexico’s automotive industry, Mexico is currently the eight largest car producer in the world and is the sixth largest car exporter,nearly 80% of vehicles produced in Mexico are exported to the United States, 11 out of every 100 cars sold in the United States are made in Mexico.  Auto production is expected to reach 2.4 million units by 2014 with a projected growth rate of 5.5% per year and account for 18% of Mexico’s manufacturing GDP, while generating 56,000 jobs.


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