Whitepaper: Why Mexico Needs More Proven Auto Suppliers
Nine out of the world’s top ten automakers now manufacture cars and light trucks in Mexico, which is the world’s seventh largest producer. U.S. companies such as GM, Ford, and Chrysler; Germany’s Volkswagen and BMW; along with major Japanese companies such as Nissan, Mitsubishi, Honda, and Toyota all operate assembly plants in Mexico.
But automotive suppliers in Mexico remain in dire need by the OEMs and major Tier One producers. The most notable gap in Mexico’s supply base lies beneath the Tier One level. Quality and reliability are uneven, a shortage of common key production processes persists, and importation and external expertise are still required.
These shortages represent tremendous opportunity for international auto suppliers contemplating a Mexico manufacturing footprint.
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Mexico’s auto sector has grown in leaps and bounds throughout the past two decades. Despite substantial investment, however, shortcomings remain in several key areas up and down the automotive supply chain. These gaps yield considerable expansion opportunities for mid-market suppliers that are able to enter Mexico and manage their own operations.
Automotive manufacturers in Mexico source most of their parts from the U.S. and Europe, as they lack access to automotive suppliers in Mexicoand have to seek more sophisticated processes more readily found in mature auto-producing and supplying countries.
Particularly, the country faces a shortage of Tier Two and Tier Three suppliers, including suppliers of injection-molded parts. About 70% of Tier Two and Tier Three basic components used in Mexico are imported into the country, according to Dietmar Ostermann, PwC’s global automotive advisory leader. That includes some $6.5 billion in injection-molded components.