How China’s Slowdown Is Fueling Mexican Manufacturers

mexican-automotive-industryAs Chinese wages and currency concerns rise, major auto manufacturers are increasingly looking south of the U.S. border for their needs. Ford, Audi, Nissan, and Honda are committing billions of dollars on new plants in Mexico—and demand for nearby auto-parts manufacturers, auto textiles and parts suppliers will follow suit.

Driving part of the discontent are China’s pay rates, which have soared from 60 cents an hour (2000) to $2.50, and are expected to surpass Mexico’s $3.50/hour, according to a recent article in The Wall Street Journal (WSJ). “Mexican workers typically produce more per hour than Chinese workers,” the newspaper reports.

Mexico’s low production costs and free trade agreements with the U.S. have long made it an attractive partner for manufacturing cars, a product for which its neighbor to the north has an insatiable appetite. The U.S. imports up to 64% of Mexico’s domestically produced cars, according to the WSJ. The proximity reduces freight costs—a boon for these bulky, weighty products. And for carmakers hoping to boost sales in South America, Mexico manufacturing holds extra appeal.

To that end, four of the world’s top auto makers (Ford, Nissan, Honda and Mazda) have already made major factory investments in Mexico. Recently, Audi AG followed suit with a $2 billion pledge for its first Mexican-based SUV plant. Last summer, news broke that BMW is also considering four different sites in Mexico to assemble its 3-Series by late 2016. Infiniti has shown interest in Mexico as well—as a means of saving on U.S. import duties as well as providing proximity to new markets in South America.

 

Mexico Shelter Services

As a Mexican supplier for shelter services, we are excited about these developments. Currently, there’s an on-the-ground shortage of suppliers of plastic resins, automotive sheet metal parts, pneumatic tires, seat fabrics, headlining fabrics, and trunk and floor mats in Mexico. If you’re an auto parts manufacturer, MFI can help. In under two months, our shelter services can streamline and/or accomplish your local hiring, fiscal and accounting control, environmental compliance, permitting, customs, and other start-up services.

Are you prepared to profit from this nearshore industry explosion? Let us know your thoughts on what an increase in Mexico’s manufacturing industry will do for local and foreign suppliers and manufacturers, and how it will impact the global balance in auto manufacturing.

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