Mexico Manufacturing: Breaking Down Cost Savings by the Numbers

Cost savings is the number one reason why U.S. and other foreign manufacturers look to Mexico as part of their growth strategies. Two areas manufacturing leaders see the most benefit are employee salaries and building leases.

These represent the bulk of expenses for any type of production, and being able to reduce these costs in any way can help companies scale and succeed. To determine if manufacturing in Mexico is the next best step, here’s a general breakdown of costs for each.

Salary Costs for an Entry-Level Operator

Even with minimal salary adjustments, costs are still competitive. Mexico’s direct labor for an entry-level employee is $6.50 per hour compared to the U.S. cost of $24 per hour. For it to make sense to move forward, there needs to be more than 50 workers in production to achieve cost savings.

The below calculations reflect fully burdened “all-in” salary estimations that apply to a manufacturing position which represents the full cost that an employer needs to cover to hire a worker in Mexico. This hourly salary includes mandatory benefits, market benefits, federal taxes, state taxes, social security, and other payroll-related taxes.

Annual Salary Savings (USD) 

Keep in mind salary totals may include indirect employees. Indirect employees maintain roles that are not part of production, such as engineers and those involved in procurement or purchasing. These types of jobs require at least a Bachelor’s degree, and candidates are bi-lingual with a higher expected average salary starting at $18.50/hour.

Cost of Leasing When Manufacturing in Mexico

In addition to saving on salary costs, U.S. manufacturers can save when leasing industrial space in Mexico. California lease rates, in particular, are nearly double the rates found in areas like Mexicali and Ensenada.

Lease Cost Comparison (USD)

Manufacturers can count on similar lease prices in 2025 as new buildings are being built and the country continues to expand its industrial research. Also, compared to China, U.S. companies can save on transportation and stay on track with timelines, as well as benefit from other built-in advantages, when manufacturing in Mexico.

Other Key Areas Manufacturers Save Money

The IMMEX program continues to experience steady growth as more foreign manufacturers expand to Mexico. However, even with the increasing competition, many of the cost-saving benefits remain the same, especially when working with a shelter company.

Value-Added Tax

U.S. and other foreign manufacturers that are approved for the IMMEX program and become VAT-certified receive an exemption of the 16% VAT on all temporarily imported goods, equipment, and materials. This significant tax relief is available immediately when operating under a shelter.

Administrative Fees

Rather than recruiting and onboarding separate departments to handle HR, accounting, taxes, and other administrative areas to launch production, a shelter company handles all of these responsibilities. This allows manufacturers to focus fully on production and achieve a setup timeline of three to four months from the time a building lease is signed.

Minimized Liability

As part of the IMMEX program, a foreign manufacturer can choose to operate as a standalone entity or work under a shelter. One of the many advantages of working with a shelter company is it limits a company’s legal risk and exposure. This helps to avoid delays and penalties that could jeopardize an entire operation.

Get a True Look at the Numbers

The actual cost of manufacturing in Mexico varies depending on the market, type of production, and the jobs that need to be fulfilled. We can help you calculate your specific cost savings to determine if it makes sense for your company’s goals.

Call IVEMSA today.