Key Factors Contributing to the Success of Automotive Manufacturing in Mexico

Automotive manufacturing has always had a strong presence in Mexico with global manufacturers, including BMW, Volkswagen, Kia, Audi, and more recently, Tesla, setting up maquiladoras since the 1960s. Many have maximized their success by building upon the foundation they’ve built and investing further in its growth, while others are manufacturing in Mexico for the first time.

As of 2023, Mexico is the world’s seventh-largest passenger vehicle manufacturer with over one million employees producing close to 3.5 million vehicles annually. Momentum has continued to build throughout the decades. However, the USMCA requirements for original auto content in North America have led to record-breaking growth over the past two years.

Additionally, with a seasoned supply chain and new facilities continuing to be built, manufacturing in Mexico remains the most cost-effective option for U.S. automotive manufacturers. However, there are several other factors contributing to the surge the sector is experiencing, including the U.S. Inflation Reduction Act, proximity to the U.S. market, and a skilled technical workforce.

U.S. Inflation Reduction Act

In 2022, the Inflation Reduction Act was signed into law to secure America’s leadership position in domestic clean energy manufacturing. It promotes regional EV production tax incentives and supports the expansion of clean electric vehicles.

As automakers focus on EV production, they continue to invest in new factories in Mexico. Volvo, Toyota, Honda, and BMW are among the many global automotive leaders that have already extended their production in 2024.

Proximity to the U.S. Market

The strategic location of Mexico in proximity to the U.S. market is a significant advantage for manufacturers. They can get products to market quicker and at a more cost-effective rate.

With reliable supply chains and multiple transportation networks, manufacturing in Mexico has become a sustainable strategy for those in the automotive sector.

Skilled Technical Workforce

Since manufacturing is the top industry in Mexico, the country invests in advanced education, vocational training, and collaborative worker programs with manufacturers to create a sustainable workforce capable of handling manufacturing tasks.

Every year, thousands of technically skilled graduates are available to fulfill the various roles necessary for automotive manufacturing, as well as for production in other sectors.

Strategies for Success

Manufacturing in Mexico combines cost efficiency with a close proximity to the U.S. market which creates a strong position for automakers who want to save costs without compromising quality and delivery of production. Therefore, those with an interest in expanding their production to Mexico want to ensure a competitive advantage by working with a shelter company.

This option is unique to Mexico and offers the experience and expertise necessary for U.S. and other foreign manufacturers to launch production safely, quickly, and efficiently. Those who work under a shelter minimize their risk and exposure while benefiting from the built-in services provided. These include:

● Site selection
● HR and payroll
● Recruiting and retention
● Taxes and accounting
● Trade compliance

Having the support of local experts can get your production up and running in as little as three to four months compared to setting up as a standalone entity. Since manufacturing in Mexico will only continue to grow, it’s beneficial to work with a shelter partner to help guide the way.

To follow in the footsteps of other successful automakers (as well as manufacturers from other sectors), reach out to IVEMSA for a consultation today.

Source:
https://home.treasury.gov/policy-issues/inflation-reduction-act