China vs. Mexico for Manufacturing Expansion

There have been ongoing comparisons between the value of manufacturing in China vs. manufacturing in Mexico. Though each has its own advantages, the final decision isn’t always choosing one over the other but rather diversifying where to expand production.

Manufacturing in Mexico is cost-competitive, yet cost on its own isn’t always the deciding factor when choosing this option over China. The greatest advantage in expansion to Mexico vs. China is the reaction time to the U.S. market and the availability of Mexico shelter services.

Mexico has a proximity advantage that China, nor any other Asian country, can’t compete with. For instance, even if manufacturing in Southeast Asia may be a cheaper place to produce goods, the supply chain is not as reliable for some industrial sectors, and the transportation time and expense overshadow any savings on labor when shipping to the North American market.

Depending on their audience, manufacturers may choose to launch factories in multiple regions, as China is still an attractive option. However, when addressing a U.S. market, specifically, nothing beats the benefits of Mexico manufacturing. Here’s why:

Easier Access for U.S. Manufacturers

Overseeing production in China comes with a set of challenges that starts with a significant time difference and extensive travel from the U.S. Whereas, manufacturers headquartered in the U.S. can easily travel to their operations within a few hours and with fewer hurdles.

Due to the proximity between the U.S. and Mexico, shipping time and transportation costs are also greatly reduced compared to China manufacturing. This helps to reduce operational delays and allows companies to release products to the U.S. market faster.

Support for the North American Economy

Manufacturing in Mexico vs. China also expands the value to the U.S. economy. Most production materials are shipped from the U.S., which supports its suppliers and combines the infrastructure of the two countries. Plus, it provides the opportunity to employ workers who live in the U.S. as well as Mexico to fulfill the required job roles.

Moreover, the free trade agreement between the U.S., Mexico, and Canada (USMCA) has special requirements and incentives regarding regional value content to benefit North American countries. For example, 75% of a vehicle’s content must be made in North America to qualify for tax-free status, and there are established intellectual property protections that China doesn’t offer.

Delivers a Risk Reduction Strategy

Manufacturers that choose to expand to Mexico have the unique option of partnering with a shelter company. This minimizes the risk and liability of operating in a foreign country for manufacturers since they will not establish a legal presence when operating under a shelter.

Additionally, setting up factories that manufacturers can easily visit and provide oversight is also part of a risk reduction strategy. When there are delays or problems that arise, U.S. manufacturers can travel to production sites in Mexico in a day versus the extensive time, cost, and planning it takes to travel to China.

Furthermore, a Mexico shelter company takes on all administrative responsibilities necessary to launch production so manufacturers can focus their efforts on production and processes. The support and services of a shelter’s local expertise reduce the learning curve and costs, advance start-up time, and allow companies to stay agile as they grow.

Choosing Mexico as a Competitive Advantage

While there are still reasons why manufacturers maintain production in China, it makes sense for those targeting the U.S. market to consider expansion to Mexico. And, by choosing Mexico shelter services, manufacturers can experience a speedy and seamless transition and get up and running in three to four months.

Learn more about the benefits of manufacturing in Mexico and how our shelter company can help you be successful. Contact IVEMSA today.