While NAFTA Inches Forward, Mexican Auto Industry Continues to Surge

Despite what could have been a year full of stumbles, Mexico’s auto industry has proven itself to be resilient in 2018. One such example of an international auto manufacturer willing to trust in Mexico’s ever growing expertise is German auto manufacturer BMW.

The luxury car company has nearly completed a BMW plant in San Luis Potosi. Reported to have been in its equipment installation phase and 87% complete in February, 900 employees have currently been hired, and the company has already acquired 170 suppliers in Mexico. When operations begin in 2019, that number is expected to increase to 200.

Those additional 30 suppliers are expected to operate in other Mexican states. The BMW assembly plant has also attracted 20 new automotive suppliers to the region. The company is expected to allocate up to $5 billion USD for component purchases once the San Luis Potosi plant begins its run. That is double the amount the company spent in 2016.

The World is Watching

Mexico has also received plenty of recognition in recent years for its position as a world leader in the automotive industry, but it might be receiving its highest honor in just a few weeks. Mexico is becoming the first-ever Spanish speaking country to be designated the official Partner Country of Hannover Messe – the world’s largest industrial trade show.

Dr. Jochen Köckler, Chairman of the Managing Board of Deutsche Messe stated, “The eyes of the entire industrial world will now be turned to Mexico. This partnership is a win-win for everyone and will do much to grow and improve economic relations between Mexico and Europe.”

Certainly, the country has proven itself to be a valuable partner and industry leader. With a $1.3 trillion GDP, Mexico now ranks as the 2nd largest economy in Latin America. The country has also received $163 billion in investment during the current administration. The world has definitely taken notice of Mexico as a competitive industrial hub, and a bevy of international automotive manufacturers are taking advantage of its educated workforce, low labor costs, and numerous free trade agreements including “a network of 10 FTAs with 45 countries, 32 Reciprocal Investment Promotion and Protection Agreements (RIPPAs) with 33 countries, 9 trade agreements within the framework of the Latin American Integration Association and [membership in] the Trans-Pacific Partnership Agreement.”

NAFTA Still in Negotiations: Mexico’s Auto Industry Moves Forward  

Despite the uncertainty of NAFTA, Mexican auto production and exports continue to prosper. The Mexican Automotive Industry Association (MAIA) reported that exports to the U.S. are up 9.5%, improving on last year’s numbers. There’s also a 6.2% increase in auto production in Mexico, with the country expected to produce over 4 million vehicles for the year. This would be the first time ever if they are able to stay on pace.

In the first two months of the year, auto production rose 6.1% – breaking another record – as per data from the MAIA. Exports for that time frame rose 8.5% at over 500,000 vehicles, with about three-quarters heading into the U.S.

Automakers are still planning on expanding into Mexico as well. For instance, General Motors increased production by 14.6% and Fiat Chrysler by 39.1% last year. There’s also Mercedes, which is planning on opening a plant in the country in late 2018, in addition to the previously mentioned BMW site.

While all parties involved with the renegotiation process hope that NAFTA will keep all countries highly integrated and competitive, Mexico is carving itself out as a force to be reckoned with.

El Grande Group is the Partner You Need to Expand Your International Manufacturing Operations in Mexico.

If you are looking to move your manufacturing business, contact our international manufacturing business experts today.