Mexico Looking for Real Commitment from Hyundai
Commentary by John Paul McDaris
Korea-based Hyundai is facing growing pressure from the Mexican government to build a new manufacturing plant in Mexico or face restrictions on the importation of vehicles, according to industry sources and as reported in the Korea Herald and just-auto.com.
Mexico requires auto manufacturers to have at least 50,000 units produced locally or pay a 20% tariff on imports. Most of its production has been for vehicles sold by Chrysler under the Dodge brand. The Mexican government has been in talks with Hyundai to resolve the matter.
It’s interesting that Mexico is making it increasingly difficult for OEMs to enter the country, which has a trickle-down effect of making those OEMs even more demanding of the tier suppliers further down the food chain. When entering Mexico becomes riskier for OEMs, they do all they can to spread out that risk and share it with suppliers by taking steps like offering non-guaranteed contracts, for example. Furthermore, the incentives that Mexico offers to the big OEMs are limited to the OEMs themselves, to help hedge that risk a bit. The OEMs don’t pass along those incentives to suppliers.
Risk Mitigation is Key to Success in Mexico
When it comes to lowering risk and helping countries enter Mexico more quickly and seamlessly, the services of a shelter provider like Entrada are invaluable. By turning to Entrada, foreign manufacturers are not only freed from the burden and hassle of establishing G&A services in a foreign country (HR, payroll, import/export, transportation and warehousing, purchasing, financial services, IT and facility support and more), they are also relieved from the risks. Because foreign manufacturers are “sheltered” from some of the risks, legal liabilities and compliance issues that companies normally face when they look to enter Mexico on their own, doing so can be accomplished in as little as 90 days.