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Auto Industry to Invest $10 Billion in Mexico

01 November, 2013

According to a report this week from Reuters, Mexico’s automotive industry is about to take another series of giant leaps forward in the coming months and years, with at least $10 million earmarked to build new factories over the next six years. 

During the next year or so, BMW, Toyota and Daimler’s Mercedes-Benz will begin moving forward with new deals totaling at least $2 billion, while Nissan Motor Co.,Honda Motor Co., Mazda Motor Corp. and Volkswagen AG have already collectively pledged close to $6 billion in new investment money. Other U.S. automakers are also planning to increase production and upgrade plants throughout Mexico to the tune of $1 billion, while VW and Nissan have moved toward completing additional expansions that would total at least $1 billion.

“Mexico ‘is quickly turning into the China of the West,” stated Joseph Langley, a senior analyst at Michigan research firm HIS Automotive, in an interview with Reuters.“By 2020,Mexico will have the capacity to build one in every four vehicles in North America, up from one in six in 2012.”

Lower wages, a solid supply chain, a favorable geographical location and the world’s largest number of free trade agreements held by any nation are all helping to make Mexico the obvious choice for corporations from around the world, including the automotive industry. The record amount of new investment dollars that are fueling Mexico’s auto boom also have a positive effect on employment opportunities, with output expected to grow by more than 60 percent by 2020.

“Mexico’s economy is seen growing faster than Brazil’s next year,” writes Reuters. “The auto investment could help Mexico challenge regional dominance by Brazil.”

With wages already close to 20 percent cheaper than China and considerably lower energy costs, other manufacturers are also expected to move operations to Mexico in the coming years, including vehicle parts manufacturers and other important suppliers to the automotive industry. 

"The level of activity in Mexico is insane,”  Langley stated. “Mexico is building more auto plants than in the United States or Canada through 2020.”

Topics: Investment Industry Mexico