Despite eventual changes to the North American Free Trade Agreement (NAFTA) and possible fees to Mexican imports to the United States, automotive brands from around the world are expanding within Mexico for its competitive advantages.

As Ford withdrew its plans to invest in an assembly plant in San Luis Potosí, there is uncertainty in the manufacturing and 3PL companies in Mexico.

Even though companies are putting forward or adjusting upcoming projects, other manufacturing plants have “reaffirmed their confidence to continue investing in Mexico”, according to T21.  

There are still active signals in the market, as several brands frome Europe and Asia are investing in new assembly lines, manufacturing plants and logistics capacity.

Audi begins operations in Mexico

The German company will star developing the second generation of its Q5 model at a new manufacturing facility in San José Chiapa, Puebla, in a US$ 1,123 million investment.

Audi opened the plant in September 2016, and expects to produce 15,000 units a year to export around the world- except India and China- reported  EFE news agency.

The company also set out an  area for automotive logistics suppliers, located near its assembly line.

Toyota consolidates the largest cluster in Latin America

The Japanese giant is working at a manufacturing plant in Guanajuato. The US$ 1,000 million investment will produce the Corolla model, according to El Financiero.

With the arrival of this manufacturing plan, the state of Guanajuato would become “the largest automotive cluster in Latin America,” according to the newspaper. This international logistics and distribution hub would benefit over 100 companies, 50 of which are a new supplier base.

China continues its expansion

Legacy brands are also giving way to more investments from Asian companies.

Mexican manufacturer Giant Motors announced it would invest over US$ 210 million to expand its premises in Ciudad Sahagún, Hidalgo, to manufacture cars from JAC Motors for the local market, according to Economí

The competitive advantage of Logistics in Mexico

Mexican President Enrique Peña Nieto called his people to seize the opportunities Mexico has in international trade. He added that the country has become a logistics center for global trade, as a natural bridge between different regions around the world.”

The figures show it.

Mexican automotive has the goal to produce 5 million units by 2020. American brands, such as Ford, General Motors, and Fiat Chrysler have plans to manufacture nearly 1 million in Mexico by 2020, explains David Welch, an investor, and contributor to Bloomberg.

Miguel León Garza, the dean of the  Instituto Panamericano de Alta Dirección de Empresa (IPADE), explains at Excelsior that Mexico has a series of comparative and competitive advantages that has positioned the country as a “leader in manufacturing and exports in world automotive goods”.

He adds that Mexico provides a great location, trade deals with over 40 countries, the quality of its workforce and a low-cost supply chain, as opposed to the United States.

In fact, according to figures given by  ProMéxico and other experts, car manufacturing in Mexico is 20% cheaper than the United States.

Welch adds that an American brand saves US$4,300 in total per vehicle in Mexico even though it pays an additional US$300 in transportation costs.

  • 600 savings on assembly plant labor
  • 1,500 savings on parts
  • 2,500 savings on tariffs

With these competitive advantages and million dollar investments, auto parts in Mexico are facing challenges with dynamism. {{cta(‘b1bd6aa1-7d1a-4329-bf13-6f164cff86a2′,’justifycenter’)}}

What do you think about the projections of the automotive industry in Mexico?