Global automakers invest heavily in a new manufacturing hub.
Mexico has become a popular plant locale for many automakers due to its cheap labor and its free trade partnership with the United States. A third factor is Mexico’s central location; lending to a logistically convenient travel hub to and from the country.
A recent study conducted by Bank of America found that Mexico is becoming cost competitive with the long-standing auto manufacturing giant, China. The Center for Automotive Research in Ann Arbor, MI reports that since 2011, Mexico has attracted nearly $10 billion in foreign direct investment (including commitments that have not yet been fulfilled) from the global automotive sector. This number is sure to increase as more and more global automakers break ground in Mexico.
At least nine automakers plan on investing in assembly and production facilities in Mexico in the next few years, including:
Ford Motor Company
Ford plans on investing close to $2.5 billion in Mexico, about half of which will be used to expand its Chihuahua plant and to construct a new transmission plant in Guanajuato. The Chihuahua expansion alone is expected to add 4,000 jobs to the area.
Toyota, the world’s largest automaker, announced this month that it will spend $1 billion in the construction of a new factory capable of producing 200,000 cars annually, beginning in 2019. Toyota predicts this will add 2,000 jobs to northern Mexico.
GM has plans to double production in Mexico by investing $3.6 million into its existing plants, in addition to the $1.4 billion the automaker has already invested in the area since 2013. The influx of money will run through 2018, and be used to modernize production lines and update technology at four manufacturing complexes. GM officials forecast this investment will create over 5,000 jobs and deliver capacity to double current production of vehicles, transmissions, and engines.
Back in 2013, Chrysler announced it would be investing $1.25 billion in Mexico to expand an existing plant and break ground on a new plant in Saltillo. Less than two years later, Fiat Chrysler CEO Sergio Marchionne plans on injecting even more money into the country: “We are relatively close to making decisions…that would increase head counts at both of those plants.” The Toluca, Mexico plant currently employs 2,500.
Nissan and Mercedes Benz
Breaking production records in the U.S. and Mexico last year, Nissan production in Mexico increased nearly 19%. One of the first major automakers to invest heavily in Mexico, Nissan is expanding funding its partnership with Mexico. Partnering with Daimler AG, Nissan plans to build another plant in northern Mexico to produce its luxury Infiniti branded vehicles in 2017, with Daimler adding production of Mercedes Benz models the following year.
Kia announced late last year that it will invest more than $1 billion in a new assembly plant in northern Mexico, with production to commence in 2016. This factory will add needed vehicle production to Kia’s sole North American plant in La Grange, GA, which is operating at full capacity.
In 2014, Honda Motor Co. Ltd. began making the sub-compact Fit at a new $800 million plant in Celaya, Guanajuato state, employing 1,500. Honda also has an assembly plant in El Salto, Jalisco where it produces the popular CR-V crossover employing 3,200.
Image 1: An employee at the Ford plant in Cuautitlan Izcalli, Mexico installing a Fiesta door panel. Two-thirds off all vehicles manufactured in Mexico are exported to the U.S. (credit: www.washingtonpost.com)
Image 2: OEs from around the global are investing heavily in Mexico. With its cheaper labor, proximity to the U.S., and favorable trade laws with 40 countries, it appeals to nearly all OEs and to their suppliers. (credit: www.automotivemeetings.com)
Image 3: The Fiat 500 assembly plant in Toluca, Mexico. The plant has undergone a major expansion to also assemble the Dodge Journey and the Fiat Freemont. (credit: www.autorevolution.com)