Mexico Close to Overtaking Brazil as Latin America’s Top Auto Producer
Commentary by JP McDaris
In the 2014 World Cup, Mexico and Brazil played to a draw. But when it comes to the race for Latin America’s top automotive producer, Mexico may soon be in the pole position.
At the end of 2013, Brazil stood at seventh in the world for total automotive production, having churned out some 3.75 million vehicles. Mexico stood in eighth place, about 700,000 units behind its larger rival. But with Mexican production capacity so high and $10 Billion of new automotive investment expected to flow into the country by the start of 2016, Mexico may soon be eying Brazil in the rearview mirror.
Sources such as Automotive News and Marketplace predict that Mexico will account for 25% of all automotive production in the NAFTA region by 2020. Mexico’s competitive advantages include its 44 international trading partners and a very competitive and well-trained workforce. Automotive News cites hourly rates between $6.50-$8.00 for production engineers as attractive to manufacturers. In central states like Zacatecas, less demand for labor keeps hourly rates some 30-50% lower, on average, depending on the position.
Suppliers Needed to Sustain Growth
So what is Mexico missing? One area that could further boost growth, in the automotive as well as other sectors, would be a rounding out of the supply chain. The top of the pyramid (the province of the OEMs) in Mexico is growing despite the fact that the wider support base at the bottom of the pyramid (the supply chain – particularly tier two and tier three suppliers) is not fully developed.
In Mexico now, there is a strong demand for forgings, castings, plastic injection moldings, fasteners and electrical parts – among other components. At Entrada Group’s industrial park in Zacatecas, we currently work plastic injection molders within the automotive, aerospace and medical device industries. Like many companies that transitioned to Mexico, they were attracted to the region by competitive labor costs. But the reason they stay in the area and increase their footprint and production capacity? New opportunities.