Mexico – Not Just for the Big Players
An increasing number of privately-held, midsized companies have expanded their offshore manufacturing presence in response to growing demand for their wares. At first, it was larger multinationals like General Electric, Honeywell, General Motors, Delphi and others that set up manufacturing or R&D facilities in Mexico. For decades, large companies have realized many benefits from a manufacturing presence in Mexico, including access to a highly skilled workforce, proximity to the North American market, stable costs and currency, and solid English language skills. Now smaller firms are getting in on the game too, choosing Mexico instead of China for offshore development and manufacturing.
Wages in Mexico are more stable than in China, where some regions are seeing increases of up to 20 percent in labor costs. That combined with high inflation in China and rising sea transport costs, are additional factors making Mexico a more desirable destination for international companies in North America.
TECT Aerospace for example started manufacturing aviation parts in Mexico this year. The company expects their new factory in Guanajuato, Mexico to employ 50 full-time staff when the plant is fully operational. Growth spurred by an increase in the production of jetliners and military projects necessitated the expansion. So far, the launch has gone well, according to Ray May, director general of TECT Aerospace. “The quality and work ethic of the workforce, and support provided by local and regional governments has been instrumental in the smooth startup of operations.”
This sentiment is not coincidental, as the Mexican government has invested heavily over the past decade in educational programs and other engineering and technology training, in efforts to develop a workforce more attractive to multinationals from the U.S. and elsewhere. Mexican universities have churned out a large number of engineers (some estimate up to 500,000 students are enrolled in engineering programs across Mexico) who also possess solid English skills, ready to put their expertise to work.
Privately-held tier two and three suppliers are also discovering that a presence in Mexico not only permits them to continue serving their traditional tier one customers, but as well exposes them to the increasing opportunities granted by the wide range of Asian OEMs also flocking to the region.
Nissan for example has already laid the foundation for its new manufacturing complex in Aguascalientes, its third in Mexico and the second in the state. The complex is being established to increase manufacturing capacity needed to satisfy the high demand for Nissan vehicles in the domestic and international markets. The location will include a supplier park and a quality proving ground.
In fact, Japanese automakers are opening new plants one after another. Koito Manufacturing has decided to build a production site in Mexico as well. As Japan’s largest automotive lamp manufacturer they are currently choosing where to locate the plant. Expected to take around 10 months to construct, the company expects that its facility will be completed well before automakers such as Nissan and Mazda increase Mexican production in early 2014.
There are many reasons to establish manufacturing and R&D facilities in Mexico. With the ease of entering the country, it’s now become attractive to all firms looking to gain a competitive advantage – not just the big guys.