UK-based engineering giant GKN announced that it plans to invest at least $100 million over the next three years to expand its driveshaft operations in Mexico, according to recent reports by the Financial Times and Bloomberg. The decision follows a marked increase in demand from carmakers in Mexico, who are eager to capitalize on the country’s free trade agreements.
As part of the plan, GKN announced it will also build a new precision forge at its existing facility in Celaya, which will bring with it an additional $11.5 million investment.
“Mexico is a very important market in itself: Light vehicle production there should rise from 1.7m today to 3m within the next three years, ” shared Andy Smith, CEO of the GKN driveline division. “But it also gives us exposure to the U.S., where sales are strong and there is still a lot of pent-up demand after people put off buying cars in 2008-2009.”
Big auto manufacturers already expanding in Mexico include Nissan, which is building a $2 billion plant in Aguascalientes, as well as Honda and Mazda, which are construction plants in Guanajuato, a new Audi plant that will mark the first North American production plant for the German carmaker, and Volkswagen, which operates its second-largest factory near Mexico City.
As a member of NAFTA, Mexico has free trade agreements with 45 countries and low labor costs, making it a very attractive option for carmakers aiming to serve markets spanning all the way from the U.S. to Brazil and even Europe. According to OICA, the international carmaker’s association, vehicle production was up 14.4 percent in Mexico in 2011, which bumped it up to the world’s eighth largest carmaker, surpassing Spain for the first time in history.
Smith also noted that GKN would reevaluate its investment in Mexico real estate as the country’s largest carmakers unveiled their plans for the coming months and years, stating that a growing trend towards all-wheel-drive vehicles could further increase demand for GKN products.