One of the fast growing industries in Mexico is the automotive manufacturing industry, both in terms of making auto parts and finished vehicles. This industry’s growth has hit the accelerator hard in recent years, as Mexico’s automobile production in 2015 is expected to be twice its volume from 2009 at more than 3 million units. It seems like the industry is perpetually speeding ip, with March 2012 setting the record both for most vehicles produced in a month (268,625) and in a quarter (713,643). The majority of these vehicles (approximately 84 percent) are slotted for export. Although the United States remains the main importer of Mexican-made automobiles, other regions, such as Latin America and Europe remain major targets for expansion.
As production in Mexico continues to pace the country’s economy, the fuel for this movement comes from foreign investment. Between 2007 and 2012, almost 11 billion USD was invested in Mexico’s auto industry, according to a recent article in Negocios ProMexico. A variety of different companies, including Volkswagen, Ford, Honda and Mazda have all made significant investments in factories in Mexico and are establishing new facilities. One of the reasons why Mexico has become such an attractive investment for automobile manufacturers is its balance of cost and quality production; as a comparison study done by Volkswagen showed, manufacturing in Mexico is less expensive than other high-quality locales such as Brazil, while also providing better quality than other low-cost destinations such as India.
The engine behind this surge in investment has three main components: Mexico’s location, free trade agreements and Mexico’s workforce. As the United States’ southern neighbor, Mexico is in a prime location for shipping to one of the most important consumer markets for automobiles. As a member of NAFTA and other trade organizations, Mexico’s manufacturing is also the platform to a number of free trade agreements, which allows preferential treatment in terms of tariffs and taxes for shipments to other countries as well, giving Mexico an enviable position on the international scene. Finally, Mexico’s extensive collection of universities and other higher-education institutions affords it a wealth of skilled and trained workers to facilitate the set up and ramp up of new operations.
Mexico’s automotive market share is expected to increase as certain promising trends continue. After a banner year in 2011, auto part manufacturing continues to have a bright future in Mexico, further supporting the manufacturing of fully assembled cars. Mexico is able to produce the materials needed for parts more cheaply than other locations, which is expected to increase foreign investment and production. Additionally, the country’s favorable legal and tax framework, including its IMMEX program, makes Mexico attractive as an investment destination. Its myriad of benefits for automobile manufacturers has made Mexico a major player in the industry, a trend which is showing no signs of hitting the brakes.