As 2011 comes to a close, a look back upon automotive investment in Mexico can provide insights into North America’s evolving production landscape.
A November 29, 2011 report issued by Scotia Economics, characterized Mexico as the “auto industry’s North American growth leader.” The report stated that over the previous six months, the auto industry had “announced investments of nearly US$3 billion geared to expand existing facilities or building new plants in Mexico.”
One example of this was Honda’s August announcement that it plans to build a third plant in Mexico in order to produce “fuel-efficient subcompact vehicles for the Mexican and North American markets.” The plant’s $800 million in capital investment will increase Honda’s North American production by 200,000 units when it comes online in 2014 in the state of Guanajuato.
Earlier, in March, fellow Japanese automaker Nissan began production of the hatchback Nissan March in Aguascalientes. The Aguascalientes plant, including suppliers, represents a $1.05 billion investment, making it part of the picture of recent automotive investments in Mexico that is not included as part of the $3 billion in investments alluded to above.
The implications of these and numerous other recent investments are significant. The Scotia Economics report found that:
“[R]ecent announcements indicate that over the next several years, investment in Mexico’s auto industry is set to approach the record pace of US$1,600 per assembled vehicle set in 2004 and 2005… During those two years, Mexico’s auto sector was the recipient of 17% of the industry’s overall investment in North America, nearly double its share of vehicle production at the time. This enormous capital influx expanded assembly capacity in Mexico by 20%, and has enabled it to consistently produce more vehicles than Canada since 2008.”
Ongoing investments in new automotive plants or expanded operations in Mexico reflect the increasing strategic importance of Mexico to overall auto production in North America. Additional plant capacity should create corresponding supply chain growth and offer greater logistical and operational efficiencies to plants within the sphere of Mexico’s industrial clusters. Other advanced manufacturing operations such as heavy industry and aerospace will also benefit.
Some of these benefits should extend to the TMASC cluster as well, as far as plants in Central Mexico draw from supply chains and logistics activity that connect to the substantial, yet smaller automotive clusters located in northeastern Mexico. Nevertheless, the possibility exists that recent rapid growth of the automotive industry in Central Mexico may continue to compound, as automakers and suppliers choose to locate subsequent investments around the largest concentration of incumbent operations. This possibility highlights how important it is for the TMASC region to continue to communicate the opportunities available in Northern Mexico and Texas for future automotive investments looking to best leverage the production and market advantages of both Mexico and the US.
TMASC has developed a list of economic development contacts in the region to assist companies seeking the most competitive locations. Please visit here for a compiled list of resources.