When we think cars, we think Detroit! Or Japan if the international scene is involved. But over the past two years, a seemingly innocuous player has blazed its way across the automotive horizon of the world and that is Mexico. A clutch of stalwart companies including Ford, Toyota, Nissan and BMW have already pledged investments exceeding $5 billion to bump production in the country by 54% and open up an estimated 20,000 new jobs.
So what has caused this sudden exodus to the South? The developments have been gradual and this propitious boost is the result of the conjunction of a number of reasons.
The impetus of production has always been closely tied to labor costs. It is a recurring investment and can overshadow conveniences of logistics and sophistication of equipment. Mexico however has also grown to be a hub of well qualified white collar workers who are technically competent and can manipulate the latest machines and navigate the advancements in robotics almost as well as (or even better than) than their US counterparts. And this has fuelled the urgency to transfer a part of manufacturing to its shores.
The Center for Automotive Research has found that auto assembly plant employees are happy with an hourly rate of $5.64 compared to $27.78 charged by North American workers. The scenario is repeated where the pay of part suppliers is concerned. Mexico is content with $2.47 an hour where US natives must have $19.65.
Last but not the least; Mexico has made giant strides in the field of Free Trade Agreements. It has spent the better part of a decade pushing FTAs with more than 40 countries and thanks to its strategic location where it has easy access to both the Pacific and the Atlantic coastlines, cities like Chihuahua and Guadalajara can lay claim to the sobriquet of automotive trade hubs of the western world.
WHAT THE FUTURE SHOWS:
Mexico still has a long way to go before it can catch up with the US in terms of substantial automotive investments. The lion’s share is still grabbed by the Stars & Stripes nation that has already secured $10 billion for the coming year.
However Canada has bitten dust with a paltry $800 million. And this says a lot. Mexico’s triumph lies in the fact that the endeavors initiated on its soil do not concern re-tooling or improvements. They are hard-core factory units pumping much needed GDP into the veins of the country.
Tella Tool & Manufacturing looks forward to the future and has high hopes for the Mexican auto industry boom.