Manufacturing In Mexico Displaces Chinese Advantage

Manufacturing In Mexico continues to thrive due in part to experiencing the lowest landed costs for U.S. imports as compared to China.  Even other low cost countries such as India, Vietnam and Russia with higher overall import costs than Mexico’s, still are lower than China’s, according to the recent study conducted by AlixPartners.  Even if China experiences freight increases by only 5% per annum for the next four years, they will be relegated to cost-prohibitive status as a manufacturing giant vis-à-vis the U.S. import needs.  Why?  Besides increased freight expenditures, China has sustained rising labor costs and exchange rate pressures which are unlikely to abate.

AlixPartners also found that while the U.S. reclaimed some cost advantage during 2011 when compared to lower cost countries, it was due largely to the weaker U.S. dollar.  Other low cost countries still maintained a cost-of-production advantage at 2005-2006 levels.  Finally, in the last four years, manufacturing in Mexico, along with some locations in Europe and Asia – though not in China – have gained a noticeable and increasing advantage in offshore manufacturing.  Besides Mexico, emerging LCC’s which includes Russia, Romania, Vietnam and India, all fared better than China when exporting to the U.S.


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