Key Reasons Why EV Production Is Moving to Monterrey
11.21.23Automotive manufacturing is a key sector throughout Mexico, with a larger supplier base along the U.S./Mexico border that has adjusted to the evolving needs of electric vehicle (EV) production. However, there are other beneficial factors beyond proximity and supplier base alone that make Monterrey, in particular, a target area for growth.
Central Mexico is experiencing a surge in foreign direct investment. Here are a few reasons why and how the help of a Mexico shelter company can serve as a competitive advantage for U.S. operators.
Low-Cost Manufacturing for Leases, Labor, and Transportation
The low cost of manufacturing in Mexico is leading U.S. and other foreign operators to set their sights centrally in Monterrey. Facility leases, labor, and transportation all cost less compared to the U.S. and China. Plus, many global companies already have supplier relationships in Mexico to support manufacturing for their current lineup of vehicles.
Therefore, it makes sense to continue these established connections as the need expands into producing EV models. In addition to the convenient proximity, the availability of direct flights between the U.S. and Mexico also makes it easier for company leaders to oversee production and maintain quality control.
Established Infrastructure and Supplier Availability
Early in the year, Tesla was among the most recent global automotive manufacturers to announce investments and expansion into Monterrey, solidifying nearshoring as a long-term growth strategy. The proximity between Monterrey and Tesla’s headquarters in Austin, TX was a key reason affecting the decision due to the lower cost of manufacturing than in the U.S. Plus, key suppliers in Mexico for Tesla were already set up in the region.
However, U.S. automakers aren’t the only ones who have taken advantage of the possibility of portfolio expansion into Mexico. Chinese and Korean business leaders have also invested in Monterrey (and other areas) due to the reliability of the infrastructure and quick turnaround times necessary to reach the U.S. market faster.
USMCA Provisions and Mexico Shelter Services
Under the USMCA, North American countries are required to have 75% of their automotive content originate within the United States, Mexico, or Canada. This only boosts the motivation to explore nearshoring to Mexico and reap all the benefits available. Among these advantages are Mexico shelter services.
The unique opportunity of partnering with a shelter company allows U.S. and other foreign manufacturers to delegate all administrative tasks required for production to a LOCAL team of experts. This frees up time and money for operators to focus solely on manufacturing. Plus, they maintain FULL production control and equipment ownership throughout the entire process.
To stay competitive, it’s important for companies to adhere to strict timelines. Working with a Mexico shelter company assures a production launch in three to four months, compared to the six or seven months it takes to set up as a standalone entity. During this time, U.S. and other foreign manufacturers also save considerably on costs, including expenses for labor, taxes, and permits.
Nearshoring to Mexico has been a successful strategy for global manufacturers over the past several decades. However, recent automotive manufacturing investments have increased Monterrey’s presence as a viable location.