International logistics and distribution is moving around. The market is not only relying on the US, China and Japan for car manufacturing. The auto industry is increasingly relying on Mexico’s competitive advantages as an industrial hub in the Americas.

By the end of 2015, Mexico was the 8th largest automaker and number 4 in export of parts and components for auto manufacturers.

In fact, the Mexican car industry expects to manufacture 5 million units by 2020.

Why is Mexico an automotive logistics hub?

1. A diversity of brands

The country has united a supply chain of leading American, European and Asian car companies.

According to the Mexican Association of the Automotive Industry (AMIA), 2,552,245 units were produced in Mexico between January and November 2016.

AMIA car manufacturing figures

2. A strategic location

Mexico is a natural trade passage to  North and South America, Asia, and Europe along its coastline in the Pacific Ocean and the Gulf of Mexico.

automotive logistics map of mexico

This has fostered the creation of close manufacturing and logistics clusters around the country, easier for importing products and components, distributing supplies, manufacturing vehicles and shipping them directly across the sea.

Location and connection has promoted lean and efficient demand and planning across the auto industry and, most importantly, a supply chain integration.

3. A growing multimodal infrastructure

Automotive Logistics illustrates that in 2016 the Ford Mexico Inbound supply chain operations included 17,000 imports and 50,000 exports per month.

In fact, trucks run 90% of their inbound logistics.

However, their road and port capacity is not coping with the demand. And the public and private sector are taking actions.

Bloomberg reported that the Mexican Government targeted US$4.6 billion for port infrastructure through 2018, including four new terminals in Veracruz, where container throughput is expected to approach 900,000 TEUs.

4. A widespread network of manufacturing plants and suppliers

According to figures compiled by ProMexico:

  • 21 of the major vehicle manufacturers in the world have presence in 14 Mexican states.
  • There are more than 300 Tier 1 suppliers to the industry.
  • The terminal industry is responsible for 81,927 jobs.

 5. A cost effective workforce explains that the Mexican workforce in the industry has become highly skilled and labor costs are lower than in many parts of China.

Due to the boom of manufacturing in Mexico, these wages are rising, according to the Wall Street Journal But still, the Mexican cluster remains competitive.     

6. A fostering regulation

Manufacturing in Mexico has a series of tax breaks and incentives for international companies to invest, such as the IMMEX Decree, which allows manufacturers to postpone the payment of fees until their products leave a bonded warehousing facility.

This has created a cost-effective efficiency in an industry where the assembly lines and supply chain distribution is very dynamic and  highly dependent on the exchange rate.

7. Free trade agreements around the world

Figures from the Mexican Secretariat of Economy show that the country has signed:

  • 12 treaties with 46 countries (including NAFTA).
  • 32 investment agreements.
  • 9 limited accords.

8. The balance of it all

Unlike other economies, Mexico has found the way to provide both efficiencies, quality, and cost-effectiveness.

In fact, corporate strategist Roland Berger shows that Mexico best balances convenient infrastructure and logistics, with business climate, regulation, and labor costs.automotive logistics mexico competitive advantage international logistics

In a rating from 0 to 4, Mexico has 3 in all categories. 

Do you see opportunities in Mexico as an automotive logistics hub? Give us your thoughts.