Mexican Manufacturers Rising in Light Auto Production

Mexican Manufacturers are seeing the likes of Honda and Mazda dramatically increasing light auto production investment to the tune of $800 and $500 million, respectively.  According to trade group OCIA’s latest figures, Mexico manufacturers have pumped out 2.3 million auto units in 2010 alone, making it the ninth largest auto producing nation globally.  This level of activity, of course, puts the squeeze on Detroit’s ‘big three’, according to Entrada Group’s Douglas Donahue, an executive with the company.  What’s more, GM, Audi and Nissan are actively considering investing as Mexican manufacturers themselves.

Several reasons account for the trend away from Asian manufacturing and investing south of the U.S. border, not the least of which is proximity which reduces transportation costs and modulates supply chain and logistics issues.  According to a 2009 AlixPartners report, Mexico manufacturers are also more desirable than China, India and Brazil because of more favorable free trade conditions and currency parity.  For its part, Entrada Group helps Mexican manufacturers by working with suppliers who are moving operations to support European and Japanese parts production.  Mexico’s auto exports climbed nearly 24% in July alone, though the potential exists for some moderation if the American economy slows.

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