Photo credit: Old Mercedes Benz by lusikkolbaskin
Mexico is the eighth largest automotive producer in the world. The automobile industry represents 3.6% of the country’s GDP, of which 14% is of manufacturing output. According to a fact sheet published through the US Embassy in Mexico City, production has increased by a record breaking 12.01% in 2012, which comes to around three million cars that year.
Mexico auto manufacturing world-class in sophistication
One of the factors behind this growth is the high quality of these factories. K. Alan Russell, CEO of TECMA Consulting, commented, “These plants are strikingly exceptional. The quality, the technology is really exceptional. You can be in any first-world country anywhere in the world when you walk in these plants and never guess that you are in Mexico.” Another reason is that the country graduates 90,000 engineers and technicians annually, which is more than in countries like Germany and Canada.
While announcing Ford’s $1.3 billion investment in its Hermosillo plant last year, former president Felipe Calderón had boasted about the Mexican laborers saying, “Mexico, besides being good at manual labor, is being very good in intelligence, operations, in our youth’s know-how when applied to work… [The Hermosillo workers] are demonstrating once more that our country has talent, preparation and innovation to generate the best quality and at the level of the best in the world.”
More luxury auto brands choosing Mexico
The Hermosillo plant has expanded since then and moved from manufacturing family cars to producing luxury vehicles. In fact, the latest 2013 Ford Fusion was actually built in the hot Mexican desert city just like its predecessor the Lincoln MKZ. The success of Ford’s Mexican-made luxury cars is driving brands like BMW and Audi to build in Mexico while Alfa Romeo has plans to start assembling some of its sports cars there. With these companies on board, Mexico’s car manufacturing output will grow 38% by 2016.
Renewed interest from US auto industry
Due to the rising labor costs and oil expenses, automobile companies in the US have shifted some of their operations south of the border. Though many companies like GM, Ford and Chrysler had already established their factories in Mexico two decades ago, it is now that they see major potential in their older investments. “Mexican auto factories and Mexican manufacturing offer First World productivity and quality at Third World wages,” commented University of California professor Harley Shaiken. “That is an unusual combination, and right now it is a defining combination.”
New Mexican infrastructure to support auto manufacturing
Mexican president Enrique Peña Nieto has announced that he will be spending $300 billion on developing the country’s infrastructure, of which $7.4 billion will be used for three trains to connect the capital with top Mexican cities in 2014. Through this venture, Mexico’s rail system will receive a necessary boost, allowing it to be more effective in transporting freight cargo around the country and across the border. With enhanced security measured added, rail will become the top transportation method for companies like those in the automobile industry.
The right legal framework
During last two decades, Mexico has been shaping its legal framework to push the growth of manufacturing industry, in specifics, automotive, aerospace and consumer electronics. Execution of the NAFTA was only the beginning. After that, Mexico has been polishing several legal provisions, liberalising the import of materials, tools and machinery for supporting the export market. As a result of that, many automotive, aerospace and consumer electronics companies have succeeded in Mexico under IMMEX, which is an incentive program for exports reducing import duties. One of the provisions for the new Customs Law is to make optional the assistance of a customs broker for imports and exports, which could bring on fastest operations for IMMEX operations, as long as they have sharp-trained people in foreign trade. Will Mexico keep that furious pace and enter into the top 5 automakers?