Why Suppliers are Investing in Central Mexico

(Commentary by John Paul McDaris)

Avance Industrial, a major sales rep firm for Sumitomo (SHI) Demag Plastics Machinery GmbH, is opening a $1 million-plus technical center in west-central Mexico (Bajio region) in 2014. The facility will be used for demonstrations, staff and customer trainings and mold-testing services.

This investment, which follows similar operations by major German-based competitors KraussMaffei Technologies, Engel Holding, and Arburg in recent years is further proof that central Mexico is hot for suppliers from all over the world.

As reported in Plastics News, Avance Industrial has annual revenues of $18 to $20 million, with sales commissions that have grown at an average of 7-10% year over year since Mexico began its recovery from the 1995 economic crisis.

Regional advantages

While it’s typically the large companies that get the mainstream media notice for their investment in Mexican manufacturing, it shouldn’t go unnoticed that tier one, two and three suppliers are also transitioning in a big way to central Mexico to leverage the benefits of Mexico manufacturing. Such companies know they need to be here in order to service the fast growth taking place and realize their own opportunities.

Japanese auto industry suppliers like Denso, Nifco and Kasai Kogyo are getting in on the act in the Bajio region too. All are heavily involved in Mexico’s sizable and expanding light vehicle assembly industry, spurred on by large investments in the area by Mazda, Honda, Nissan as well as from Audi.

Those 4 OEMs are all building light vehicle assembly plants in Mexico, which already has 12, according to Plastic News.

In short, the opportunities for cost-competitive manufacturing and topline growth in central Mexico aren’t limited to the OEMs. Savvy suppliers are seeing gains too, with more joining all the time as Mexico’s steady auto industry growth continues.

Source: Plastics News

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