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Auto Industry Drives Economy as Companies Invest $20 Billion in Mexico

08 February, 2015

The last five years have represented a turning point for Mexico’s now-booming automotive industry,with a number of new plants promising to ramp up production for the world’s biggest automakers to the tune of a nationwide investment reaching upwards of $20 billion,Bloomberg reports.

“Mexican vehicle exports are expected to rise to a record 3.9 million in 2015,with more than 70 percent of the cars and light trucks headed to the U.S.,according to the Mexican Automobile Industry Association,or AMIA,” Bloomberg writes. “December exports alone were up 21 percent over the previous year,to 195,091.”

For example,Nissan Motor Co. opened a $2 billion facility in November of 2013 that is churning out 600 new cars every day and provides gainful employment to more than 3,000 workers. In addition,Mazda reported in late December of 2014 that accumulated production at its new Mazda de Mexico Vehicle Operation (MMVO) plant had reached the milestone figure of 100,000 units just 11 months after production began at the new facility.  These plants are just two of many that have opened or are in the planning stages throughout central Mexico; an area that has developed a rapidly expanding manufacturing base that is already proving to be a huge benefit to U.S.-Mexico business relations.

“The production of one hundred thousand vehicles at MMVO is extremely significant,” stated the company’s CEO and president in a press release. “We see this achievement as a milestone on our road towards achieving our mission of making MMVO one of the most important strategic locations in Mazda’s global manufacturing footprint.”

The 5,000-employee Mazda plant will reportedly become the largest overseas location for the Japan-based auto giant and the location’s annual production is expected to hit 250,000 vehicles by early next year. GM also made a huge announcement last December,promising to spend upwards of $3.6 billion between now and 2018 to modernize its four existing plants in Mexico. 

Furthermore,trade group INA reports that Mexico is already the world’s sixth-largest manufacturer of auto parts,with upwards of $81 billion in sales last year,and as we reported last February,Mexico has officially surpassed Japan as the world’s second-largest auto exporter to the U.S. In fact,Mexico’s auto industry has grown in production and in exports,which AMIA president Eduardo Solis told reporters last month “reflects the confidence the industry has,” in Mexico.

The nation’s growing economic power goes beyond the auto industry,however,prompting Bloomberg Markets to name Mexico one of the “25 most-promising emerging markets in which to invest,” as analysts wait for it to outperform the rest of its Latin American neighbors throughout 2015 in a number of sectors,including manufacturing.

“There’s very little debate,very little questioning of Mexico’s manufacturing competitiveness,” stated Nikolaj Lippmann,who serves as a Mexico equity strategist for Morgan Stanley. “That is very much something investors take for a given at this stage.”

According to Bloomberg,Morgan Stanley also recommends investing in stocks that are linked to Mexico’s construction and real estate markets,which Lippmann said have valuations that are currently “quite attractive.”