Industry Experts Expect Boom To Continue Until At Least 2020
Detroit is often called “Motor City,” but calling Mexico “Motor Country” is becoming increasingly more accurate.
In 2012, Mexico had 579,000 of North America’s 1.5 million automobile industry jobs while the American Midwest, including Detroit, had roughly 450,000. Since 2004, the number of auto industry manufacturing jobs in Mexico has increased roughly 50 percent while the number of the same kind of jobs in the Midwest has decreased approximately 15 percent, according to a Brookings Institution report.
In 2012, more than 3 million automobiles were manufactured in Mexico, but that number is expected to increase dramatically within the next few years because Audi, BMW, Chrysler, Ford, General Motors, Honda, Mazda, Nissan, Toyota and Volkswagen all intend to build new plants or make substantial investments in their current plants, according to articles in The New York Times and Reuters.
“The Mexican auto industry is about to go on a $10 billion factory building spree, illustrating the nation’s rising economic challenge to rivals from the United States to China,” according to the Reuters article.
More importantly, the Mexican auto manufacturing boom is part of an overall production increase that is projected to continue for the next several years. The Boston Consulting Group estimated in a 2013 report that Mexican manufacturing exports will increase up to $60 billion annually by 2018.
The boom should help companies with manufacturing plants in Mexico like MFI that manufacture products designed by other companies. MFI is a contract manufacturer for company in numerous industries, including electronics, medical devices and textiles.
In addition, Ciudad Juarez, the city on the Mexican side of the Mexico-U.S. border where the MFI plant is located, has become a manufacturing hub for the automobile, electronics and medical devices industries. The city’s auto manufacturers include Delphi, Johnson Controls and Lear. Its electronics manufacturers include Electrolux, Flextronics, Foxconn and Lexmark. Its medical device companies include Cardinal Health, GE, and Johnson and Johnson.
The fact that large companies are manufacturing products in Ciudad Juarez should encourage medium-sized companies to move to the city as well, said MFI’s President Lawrence Wollschlager, who noted that MFI has been manufacturing products for original equipment manufacturers (OEMs), public companies, and other medium- and large-scale production companies since 1982.
“Ciudad Juarez has the specialized workforce to staff leading-edge companies,” said Wollschlager. “Juarez is known for the high-quality standards in its production facilities, the efficiency and productivity of its workforce, and its easy access to the U.S. MFI’s growth and success is due in large part to Ciudad Juarez’s outstanding workforce.”
The Boston Consulting Group report cited Mexico’s low labor and manufacturing costs in comparison to China and several other nations as a crucial reason for the projected export boom. It also predicted that production in several industries, including the automobile, appliances, computers, electronics, and machinery industries, could increase by up to 19 percent by 2017 and the increased production could create up to 900,000 manufacturing jobs annually.
The manufacturing boom is about way more than low costs, Carlos Ghosn, Nissan’s CEO, told Reuters as the company opened a new $2 billion plant that will increase its annual production from 683,000 automobiles in 2012 to 1 million automobiles in 2016.
“It’s not only about cost, it’s also about quality and it’s about responsiveness — capacity to respond to variation of the market very quickly,” Ghosn said. “Mexico is becoming the export hub for the Americas — not only North America but also South America.”
Mexico’s manufacturing and export boom is also abetted by the nation’s “far greater access to major global auto markets,” according to the Brookings report. Mexico has trade pacts with 44 nations, while the United States only has deals with 20 nations. This means that Mexican exporters often pay none or very low tariffs.