Mazda in Mexico – All About Emerging Market Growth

Commentary by John Paul McDaris

The doors to Mazda’s forthcoming new plant in Salamanca, Mexico aren’t even open yet but the Japanese automaker is reportedly considering boosting production in the factory, which comes online in early 2014.

According to IHS SupplierBusiness, Mazda will start up the plant in Q1, 2014 with an initial capacity of 140,000 vehicles annually before increasing that to 230,000 per year in fiscal 2015/16. Mazda also plans to add tens of thousands of additional units to the factory’s capacity from 2016 onward.

Common Pattern
This expansion of capacity follows a trend that we have seen often at Entrada Group. It is customary for companies that set up operations in Mexico to expand production rapidly within a few years of entering the country. This is because such companies gain confidence when they see the high productivity of Mexican directs and indirects, and also because the strength and depth of locally based suppliers, without whom they couldn’t operate.

Every time I drive by the Mazda plant in the state of Guanajuato, I am impressed by the size and scope of continuous construction at Mazda’s supplier park. It speaks to the big opportunities that suppliers continue to see in central Mexico, as well as the faith the big OEMs have in the area.

Another element that intrigues me about Mazda’s fast growth in central Mexico is that it illustrates another common trend among the auto OEMs. When auto manufacturers want to boost production quickly, they look first to Mexico. In Mazda’s case, they aim to position Mexico as their main export base for North America, growing their overseas production from 30% to 50% of the company’s total output, once they are fully ramped up in 2015/16.

Further, the production occurring in Mexico will stay in the western hemisphere, according to IHS SupplierBusiness. In other words, Mazda’s Mexican manufacturing expansion isn’t just about shifting production from Asia to the Americas. It’s about new growth market and the chance to realize new opportunities.

Source: IHS SupplierBusiness

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