Fast-Growing Mexican Auto Manufacturing Benefits US

Commentary by Doug Donahue

This USA Today article, provocatively titled “Southeast Auto Industry Sees Mexico as Threat,” cites expert research that Mexico has recently replaced the Southeast as the North American region with the fastest-growing automotive industry, drawing $11 billion in investment from 2010 to 2012, compared with $7.5 billion for the Southeast in the same period.
First off, it’s true that both Asian and European OEMs are looking to Mexico to assemble cars, in the process benefiting from competitive Mexican labor, proximity to the North American market, and a shorter supply chain. It’s also true that the percentage of cars assembled in Mexico for sale in the US market will continue to increase.
However, the article seems to miss that the big auto manufacturers and their suppliers will continue to invest in all of North America, including the Southeast and traditional Midwest, for three crucial, reasons:
1. Because OEMs need to build near their consumers;
2. Because just-in-time delivery will require suppliers to invest in operations near their OEM clients; and
3. Because, since some suppliers are not labor intensive and therefore have no real cost advantage to go to Mexico, they may still choose to invest in traditional automotive manufacturing hubs in the US and Canada.
So even though more cars are manufactured in Mexico, the knock on effect is that it expands production prospects across the entire region!
Source: USA Today

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