Mercedes and Infiniti to Collaborate in Mexico

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Commentary by JP McDaris

Those watching the luxury car market, particularly tier suppliers providing parts for that market, are excited about the prospect of Nissan and Daimler working together to develop compact cars in central Mexico, as reported in news outlets such as Reuters.

The cost-cutting move, focusing on the development of compact cars, would be an expansion of the Renault-Nissan alliance with production likely to take place in Nissan’s plant in Aguascalientes, Mexico in late 2017 or early 2018, according to insiders.

The move would expand Daimler’s North American production, with the Mercedes GLA sport-utility vehicle and related models being built in Mexico. For Nissan, the central Mexico facility would allow for an expansion of the Infiniti lineup in North America.

No formal joint decision has yet been announced but insiders familiar with the matter have spoken with journalists off the record. Infiniti CEO Johan de Nysschen said in an interview at the recently concluded Geneva auto show that “Mexico does have a lot going for it, including tariff-free exports to the US and Europe.”

Mercedes, Nissan and Renault have shared engines, plants and vehicle componentry for small cars and vans since the Renault-Nissan alliance was announced in 2010.

Nissan’s Aguascalientes plant in central Mexico was opened last November with an initial production capacity of 175,000 vehicles. If the collaboration proceeds as is widely expected, the facility would have to be expanded to handle the additional capacity.

Why Mexico?

For Mercedes, a prime motivation is money savings. The joint venture with Nissan makes more economic sense than a new factory. And basing production in Mexico provides shelter from Euro/Dollar currency swings too. “Mexico is the best location for the United States,” said Daimler CEO Dieter Zetsche.

Once the deal is finalized, it opens up a raft of new opportunities for suppliers, particularly those based in Europe, looking to either leverage an existing central Mexico manufacturing location, or seeking additional justification for setting up shop.

Source: Reuters

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