Heading South - How Mexico Makes Sense

Auto industry production is revving up in Mexico, but there may be more than meets the eye as to why that is. We'll take a look at some of those reasons in this article.

WOW! MY 100^th POST! Hard to believe it’s been almost two years since I started Adam’s Autos. I always strive to cover a variety of topics and vehicles. Thanks for reading, as always, and here’s to everything that’s to come!

Across Borders

With the passing of the recent United States presidential election, one country that has been in the media consistently is… No, not China, but Mexico. Now much of what we’ve been hearing hasn’t always been positive unfortunately, but what if I told you that you may not want to disregard Mexico so quickly? There’s a good chance that your favorite car may come from there. Or there’s a good chance it may in the future. Why is that you ask? Let’s explore!

For The Culture

Info Source: Mexico Now Magazine

So exactly why are manufacturers flocking to Mexico to produce new cars? Perhaps one of the most common and widely known reasons is because of cost. Yes, there are lower wages to pay, but beyond that, Mexico offers an attractive business climate and interesting cultural practices that create a dynamic work environment. Honda began to produce its Fit subcompact to in their Celaya, Guanajuato plant in 2014. A new transmission plant is also supposed to be located near the Fit’s plant in Celaya, and will be charged with pumping out continuously variable transmissions (CVTs) for Honda products. Nissan is also another automaker that was attracted to the market conditions of Mexico and that expects to see a 25% increase in Mexico plant production by investing in their Auascalientes facility. In 1966, Mexico became the first country to manufacture Nissan vehicles outside of Japan. One out of every four cars made in Mexico now is a Nissan.

Source:
http://mexico.automotivemeetings.com/index.php/en/automotive-industry-in-mexico

Another market factor of Mexico is the fact that it has one of the largest free trade agreement networks in the world. In other words, restrictions are lower, meaning that it’s easier to manufacture and get final products moved around the world. Factor in the legal certainty that comes with this, and its no wonder why so many companies, domestic and foreign, are attracted to the Mexican market. For greater perspective, Toyota announced that the next-generation Corolla will be built in a new plant in Guanajuato central Mexico. Since the Corolla has a long-term reputation for being not only reliable, but a consistent best-seller for the brand, it’ll be interesting to see if where its produced makes any difference on its mass appeal or if it remains a compact segment leader. Ford was set to produce the next generation Ford Focus in Mexico, but recently announced that it will now be produced in China and imported instead.

Moving On Up… Mostly.

Source: IHS, Mexico Now Magazine; The U.S. remains a
powerhouse throughout the decade. However, Mexico is
gaining ground fast, even on Germany and Japan.

Based on info I've learned from interning, Mexico’s production is growing so steadily until the country is expected to be near the top five in production come 2020. Light vehicle production will be responsible for much of this sustained growth, as Mexico is the fourth largest exporter of light vehicles in the world. Technology companies, such as Google, are also eyeing the country as a future investment area. However, there are some drawbacks to Mexico’s manufacturing location. One such is figuring out infrastructure logistics, as resources are pretty stretched. Also, figuring out the aftermarket could prove to be an issue, since many sub par parts linger around. Mexican market production often has a direct correlation with U.S. production, so a change here could cause a major change there. Hence, why the President’s proposed 35% import tariff on all Mexican-made goods is so… Interesting to many. Given that two highly popular cars, the Ford Fusion and Chevrolet Silverado, have some roots in Mexico, a stiff tax on them would not only hurt consumers, but the companies that build them as well. Thus, while producing vehicles domestically is always good for local economies and job creation, for maximum revenue generation and production capabilities, utilizing resources abroad is becoming more of a must for every company since both talent and resources are spread more widely in our global economy.

Conclusion: A Global Initiative

Do you feel that Mexico will continue to become a production powerhouse? Is it possible that the country could become a hub for autonomous driving technology testing and production given its rapid growth so far? One thing is for sure: Globalization is most likely here to stay, and the companies and countries that are readily embracing it are preparing themselves for a more financially stable, diverse, and competitive position in the business world. United States workers will do best to prepare themselves for this shift by becoming more technically inclined in the 21^st century.

Here's to another 100 posts to come! I'll always 
keep it 100 when it comes to cars. Thanks again!

That wraps up things for now! Thanks for reading and supporting Adam’s Autos through the first 100 posts! More will come soon! Until then: ROLL ON!

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