Mexican Auto Manufacturing Boom Attracts Suppliers | NAPS

February 20, 2015

Did you know that more than 3.2 million cars and light trucks were produced in Mexico in 2014? Automotive manufacturing in Mexico used to be primarily for the North American nation’s own domestic market, but in the past 15 years, U.S. and foreign producers including Ford, Toyota and Hyundai have increasingly taken advantage of inexpensive skill labor, advantageous trade agreements and proximity to the U.S. auto market.

Auto parts suppliers, both direct affiliates of the major automakers who do any significant automotive manufacturing in Mexico and independent OEM and aftermarket manufacturers, are in recent years setting up shop in Mexico as well, often centering in Monterrey and its surrounding areas. Most recently, a group of 11 Korean auto parts suppliers, most of the affiliates of Hyundai Motor Corporation and its Kia subsidiary, have invested more than $1.5 billion in building and modernizing factories to bring auto parts production close to the assembly lines where the finished products are completed. In the process, these 11 companies alone have created more than 9,000 new jobs for Mexican workers.

Making the largest investment at around $418 million was Hyundai Mobis, a subsidiary of Hyundai Motor and South Korea’s largest auto parts supplier. Also heavily investing in new, modern factories was Hyundai Wia Corporation with $370 million earmarked for a brand-new modern plant.

Automakers from Ford to Toyota and their subsidiaries are increasingly turning to auto manufacturing in Mexico to solve several issues related to production cost. In addition to the expanded Hyundai and Kia campus, Honda and Mazda have opened new plants in Monterrey within the past year. As U.S. labor costs continue to rise, Mexico continues to enjoy a large skilled workforce and costs of living that are low enough for savings on wages and health care expenses. Additionally, manufacturing in Mexico allows automakers doing business in the U.S. to avoid several import taxes and tariffs, including the hefty “chicken tax” placed on all light trucks entering the United States from countries outside of North America.

By outsourcing in Mexico, parts suppliers from the U.S. and more recently Japan and Korea have been able to take advantage of this production wave to cut transportation, labor and tax costs significantly. This trend is only to continue, with industry analysts predicting an increase to 5 million cars and trucks produced annually in Mexico. Most of these vehicles are exported to the United States, but Mexican-produced cars are increasingly being exported to other world markets while continuing to serve Mexico’s limited domestic market as well.

The Monterrey area is now known as a world-class hub of auto production on the level of Detroit of decades ago. The Mexican work force is ready and willing to continue to provide skilled labor for these new jobs as they are created, making now a better time than ever for outsourcing in Mexico of auto industry labor, whether by OEMs and their subsidiaries or independent parts suppliers.