We’re Moving to Mexico

Car Assembly

According to a recent report in the Wall Street Journal, auto production in Mexico has hit record levels. “Six years ago, Mexico was the world’s ninth largest exporter of cars. Today the country is ranked fourth—behind Germany, Japan and South Korea—with exports expected to total more than 2.14 million vehicles this year,” according to the WSJ November report entitled In Mexico, Auto Plants Hit the Gas. Among those plants are a bevy of non-U.S. car makers, including Nissan Motor Co. and Volkswagen AG, which are planning multibillion-dollar factories there.

As a result the number of automobile assemblers in Mexico is also on the rise. Nemak, a Monterrey-based company and the largest independent producer in the world of aluminum cylinder heads and engine blocks for vehicles, has stated that it will make investments this year adding to US$230 million in expansions, new plants and developments.

Armando Tamez, President, said that only to meet Audi’s needs in Germany, Mexico and China, they have allocated between US$60 and US$65 million.

“In Audi’s particular case, we are participating with a global engine,” he said in an interview speaking about EA888 model.

“We are going to produce for Audi Germany there, and for Audi Mexico at the new plant to be soon inaugurated in Silao; and also for China at a new plant being built there, in Chongqing. Each region will be supplied from inside the region”, he pointed-out.

Tamez said that Nemak will soon start supplying from Mexico a new product developed for a Nissan factory in the United States. He further said that with BMW his company is posting strong growth at their plants in Mexico and in Europe, in spite of the crisis there.

Nemak isn’t the only auto supplier taking advantage of the many opportunities to break into new markets, afforded by establishing a low cost regional manufacturing base in Mexico.  Hitachi Automotive Systems Americas Inc. has started building a factory in Queretaro, Mexico. By 2016, it expects to spend $100 million on the plant. The plant, which is scheduled to open in April 2014, initially will produce suspension components.

Indeed, Mexico’s automotive manufacturing sector is positively booming. In September, for example, its auto production rose 13% to 253,444 cars and light trucks.

And though exports to North America slipped 0.1% in September to 193,350 vehicles, domestic auto sales rose 8.1% to 79,960 vehicles. It’s expected overall exports this year to hit a record 2.35 million cars and light trucks, for an about 10% increase over 2011, which marked the current record.

Supplying the Suppliers

It’s not only automakers that are reaping Mexico’s benefits. Manufacturers are setting up operations to support the increasing number of new manufacturers establishing in the country. For example Hexacomb, manufacturer of paper-based packaging and graphic display boards, says it plans to open a new manufacturing facility in in the state of Querétaro, Mexico.

“Due to the sizeable demand in Mexico for Hexacomb products, we are adding a second manufacturing facility there. Our customers, who range from large multinational corporations to smaller regional companies, want to make sure their products are well protected during shipment,” said Scott Daniel, Hexacomb president.

The company is currently looking for a facility that will be able to house core and panel making equipment, eventually producing 90 million square feet of product annually. It expects to finish the site selection process by the fourth quarter of this year.

“Today, we supply many customers in central Mexico from our Monterrey facility, which is located in the northeastern part of the country. Over the next year, we expect to grow our business in the central region even further, which is driving the need for additional manufacturing capacity in the Querétaro area,” Daniel said.

Good for Mexico. Good for US

In a second feature entitled For Mexico, an Edge on China, the Wall Street Journal reckons that a return of business to Mexico would benefit the U.S.

“American companies earn 37 cents for every dollar that Mexico exports because Mexican companies rely heavily on U.S.-made parts. The ratio is far lower for Chinese firms, which use mostly locally made inputs. Plus, more jobs south of the U.S.-Mexico border reduces incentives for illegal immigration north.”

Sources:

Wall Street Journal (Auto Plants Hit the Gas)

Wall Street Journal (An Edge on China)

Autonews

PackWorld

Mexican Automobile Industry Association (AMIA)


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