Why Are the Leading Carmakers Turning to Mexico?

Commentary by John Paul McDaris

Kia became the latest OEM to join the nearly complete list of auto manufacturers to establish operations in Mexico, announcing it will build a $1.5 billion manufacturing plant in Monterrey, scheduled to go online in 2019.

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An article in International Business Times lays out the reasons why Mexico makes sense for the Korean OEM, explaining that the company’s US plant in Georgia is working at capacity, and the new facility will help alleviate that limitation. Furthermore, Mexico’s liberal free trade policies will help Kia produce for export across the Americas, as well as for Europe. Mexico is now responsible for producing one out of every five cars in North America, according to figures from INEGI, Mexico’s statistics and census bureau.

Improved Production Quality

The article goes on to explain that Mexican auto production has moved up the food chain in recent years as well. Gone are the days when Mexican plants churned out lower-margin subcompacts and small sedans. The number of high-end vehicles produced in Mexico is increasing, as OEMs gain faith in the capabilities of the nation’s workforce. Both BMW and Nissan are, or will be, producing luxury models in Mexico.

A final note worth making following Kia’s Mexico announcement concerns location in the country. The automakers are well spread across the country, but more recent activity focuses on the center of Mexico, with manufacturers leveraging a growing automotive cluster and abundance of labor in the area. The IBT article lists the location of each automotive OEM in Mexico. Though I have to admit I am partial to Entrada Group’s Auto OEM map, showing the same information visually and with a bit more detail.

Source: International Business Times

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