Mercedes Looking to Manufacture in Mexico

June 24, 2013

Mercedes-Benz is reportedly considering opening production facilities for manufacturing in Mexico. Over the past decade, Mexico has made great strides to maintain a competitive advantage over its main manufacturing rival, China. The first to break this news on Mercedes was the Mexican daily newspaper El Financiero. Pedro Tabera, the chief of Mercedes’ Mexican operations, told the newspaper the company was considering options that include a joint production venture with Nissan, an alliance partner. Nissan already has a large presence in Mexico and is currently expanding its footprint.

Mexico’s proximity to the United States would help Mercedes to lower its production costs and improve logistics. In addition, moving some of its production there would also help Mercedes to hedge against currency fluctuations. Moreover, more manufacturers, like luxury automaker Mercedes, are looking to manufacture in Mexico because of the lack of obstacles to setting up production and doing business there. In fact, Time Magazine notes that Mexico ranks as No. 53 in the World Bank’s evaluations of ease of doing business.

Mercedes is only the latest automaker to rethink manufacturing abroad and look at bringing it closer to their largest market by locating in Mexico. Recently, Audi announced it would open a Mexico manufacturing plant by 2016, making it the only luxury automaker so far to confirm it will build new manufacturing facilities there.

Both BMW and Infiniti earlier announced they were considering producing some of their respective models there, adding to the positive outlook for Mexico Manufacturing. In fact, automotive manufacturing in Mexico has been a frequent topic of discussion throughout the industry.

At a recent panel discussion about luxury vehicles, Ferrari North America CEO Marco Mattiacci said, “Mexico is the next China,” according to Forbes. Mattiacci noted increasing indicators that manufacturers were moving production to Mexico, which has helped it become the leading manufacturing exporter in Latin America. Moreover, Mexico’s manufacturing exports as a share of gross domestic product are higher than China’s. There are several factors that have made manufacturing products in Mexico an attractive choice for manufacturers. Those include its proximity to the United States and its outstanding quality of education.

The automotive sector contributes a large share to manufacturing in Mexico. The interest Mercedes has indicated in moving some of its manufacturing there further validates Mexico as the right source for “nearshoring.”