Automotive Mexico
Mexico's car industry is a significant player in the global automotive market. The country has merged to the seventh largest vehicle manufacturer (Nissan, BMW, Audi, Honda, Mazda, Ford, Toyota, Daimler and many more) and the sixth largest auto parts producer all over the world. Most of the vehicles produced in Mexico are exported to the United States and Canada, followed by Europe.
Top Automotive Manufacturers in Mexico
The automotive industry in Mexico is a major sector of the country's economy and one of the largest producers of automobiles worldwide. It is home to many major car manufacturers, including General Motors, Ford, Nissan, Toyota, Volkswagen, General Motors, BMW, Nissan or Volvo among many others, and have experienced a significant growth over the past few decades in Mexico.
These companies have established manufacturing plants in Mexico due to its proximity to the United States, its highly skilled workforce, and its favorable trade agreements with other countries.
Thus, it is not surprisingly that this sector has been a significant contributor to Mexico's economic growth and job creation, as well as a major recipient of foreign investment. Indeed, it accounts for about 3% of Mexico's GDP and employing more than 1.8 million people directly or indirectly.
Benefits of Car Manufacturing in Mexico
Mexico's favorable geographical proximity to the United States, cost-effective labor, participation in the United States-Mexico-Canada Agreement (USMCA), and its free trade agreements with several nations have positioned it as an appealing destination for automotive manufacturers to establish their operations. Notably, Mexico is actively investing in the advancement of electric vehicles, with numerous companies planning to manufacture EVs within the country in the near future. Consequently, Mexico has steadily expanded its production capacity in recent years, leading to a notable presence of 93 out of the top 100 global automotive parts manufacturers operating within its borders.
In terms of South American automotive manufacturing, Mexico holds the largest market share, producing approximately 4,000,000 units annually, with approximately 80% of these units being exported. On a global scale, Mexico has ascended to become the seventh-largest producer of automobiles and the fourth-largest exporter worldwide.
As we can see on the graph below, Mexico almost recovered from the pandemic and sold with total 3,233,215 units in 2022 almost every month more compared to the previous year. Looking just at the light vehicles, there has been 2,865,000 cars exported which reflects a plus of 16% vs. 2021 and plus 7% vs. 2020. However, the industry is still far away from its peak time with 3,451,000 exports in the year 2018.
Mexico's Car Exports to the U.S.
As mentioned before, over 70% of the models are exported to other countries, particularly to the United States. Thus, Mexico's automotive industry's dependency on the United States market is significant, and any changes in the United States' economic policies could have a significant impact on the countries automotive industry's future growth and development. Furthermore, the North American supply chain has been a crucial factor in Mexico's automotive industry's growth. Many of the vehicles produced in Mexico are assembled using components manufactured in the United States and Canada. This integrated supply chain has made it more efficient for automakers to produce cars in Mexico and export them to the United States.
What cars are made in Mexico
When it comes to automotive manufacturing in Mexico, the primary car producer in terms of exports is the American company GM, accounting for nearly 27% of the total exports, followed by
Japanese Nissan and German VW. Moreover, Mexico's appeal as a nearshoring destination has attracted numerous other car manufacturer, including BMW, Nidec, and Citic Dicastal, who have announced investments in new projects within the country. The combined investment value of these three projects alone amounts to a substantial 2.1 billion pesos.
Producing diverse range of cars
Despite the COVID-19 pandemic causing a slowdown in 2020, the industry is expected to continue to grow in Mexico in the coming years, driven by increasing demand for vehicles in North America and the development of new technologies. Indeed, many automakers have manufacturing facilities in Mexico and produce a wide range of vehicles, from small cars to large trucks and SUVs. Mexico's car industry also produces luxury cars, such as the BMW 3, Audi Q5, Series, and Mercedes-Benz C-Class, as well as electric vehicles, such as the Chevrolet Bolt and the Nissan Leaf. Overall, Mexico's car industry offers a diverse range of vehicles for both domestic and international markets.
However, Mexico is not only strong in the car manufacturing but exports several other parts of the automotive industry such as:
• motor vehicles for the transport of merchandise• tractors• parts of motor vehicles• parts of other aircraft• trailers and semi-trailers
Tier 1, 2 and 3 car suppliers
Mexico boasts a robust automotive supplier base, encompassing both Tier 1 and Tier 2 suppliers, which play a crucial role in producing a diverse range of vehicle components. With over 600 Tier 1 automotive suppliers currently operating in the country, Mexico directly contributes to the supply chain by providing parts and components to automakers. Notably, the recent surge in nearshoring has led to a significant increase in the number of new Tier suppliers in Mexico, spurred by the "Tesla" effect, as suppliers strive to be in close proximity to their customers and leverage the advantages offered by the Immex program and the availability of skilled labor. Among the prominent Tier 1 suppliers in Mexico are Magna, Denso, Continental, Bosch, and Aptiv, renowned for their expertise in the automotive industry. It is worth mentioning that automotive suppliers are spread throughout Mexico, with certain regions being recognized for their automotive industry clusters, thus facilitating efficient collaboration and resource allocation.
Car Manufacturing Locations
Northern Border Region: Are the regions along the border with the United States and includes the states of Chihuahua, Coahuila, Nuevo Leon, and Tamaulipas. It is home to several assembly plants and supplier parks, and is a major hub for trade between Mexico and the United States. Especially Monterrey has been experienced a huge boom of new suppliers thanks to the investment of Tesla.
Bajio Region: Is located in central Mexico and includes the states of San Luis Potosi, Queretaro, Aguascalientes and Guanajuato. The region is home to several automotive assembly plants and supplier parks and has become a major hub for automotive production in Mexico.
Central Mexico: Includes the states of Mexico, Morelos, Puebla, and Hidalgo and is home to several automotive assembly plants and supplier parks. This region is well-known for its expertise in manufacturing automotive components such as wiring harnesses and electrical systems.
Pacific Coast: Includes the states of Jalisco and Colima is known for its expertise in manufacturing automotive components such as aluminum parts and electronic systems.
Southeast Mexico: Includes the states of Veracruz, Tabasco, and Campeche and is known for its expertise in manufacturing automotive components such as powertrain systems and engines. However, it is crucial to acknowledge that automotive suppliers may also be situated in other regions across Mexico, and the distribution of suppliers may evolve as the industry progresses. Moreover, Mexico is actively investing in the advancement of electric vehicles, with several companies strategically planning to manufacture EVs within the country in the forthcoming years.
Government Incentives for Auto Industry
The government has demonstrated its support for the automotive industry by implementing favorable policies aimed at attracting foreign investment, such as tax incentives and R&D assistance. These initiatives provide financial resources, training programs, and technical support to assist companies in developing innovative technologies and enhancing their products and processes. Nonetheless, the automotive industry in Mexico encounters certain challenges, including concerns regarding worker safety and environmental impact, as well as the necessity to enhance infrastructure and decrease reliance on imported components and parts.
Furthermore, the government has yet to introduce environmental incentives aimed at encouraging the adoption of cleaner technologies and mitigating the environmental footprint of the automotive sector. These incentives could involve tax credits, subsidies, and other advantages for companies investing in sustainable technologies and adopting environmentally friendly practices. Despite these challenges, Mexico's automotive industry is poised for a promising future, with sustained investment and growth anticipated in the years ahead.
Packaging Mexico
Thanks to its competitive labor costs, proximity to the United States, and long lasting experience in various manufacturing industries, Mexico is very attractive to use suppliers for packaging in any areas such as food, beverage, pharmaceutical, among many others.
Packaging
The food and beverage sectors are the top packaging machinery buyer segments, representing closte to 50% of the total packaging machinery demand.
Due to the nearhoring bookm respectively relocation from China to Mexico, the pursuit of greater environmental sustainability, automation, increased capacity and productivity are the main drivers of investment in packaging machinery in Mexico.
Some Hard Facts
- US$ 721 million packaging machinerdy demand
- 50% of the total packaging machinery demand by food and beverage
- 64% of the total demand by the countries U.S., Germany and Italy
Apparel and Textile
As Mexico’s fourth-largest manufacturing industry, the apparel/clothing, and textile manufacturing, accounts for 3.7% (1.3% in textiles and 2.4% in apparel) of Mexico’s manufacturing GDP. Volkswagen, Mercedes Benz, BMW and others are getting automobile filters, airbags, seat covers, doors, bands and cables manufactured by upgraded textile facilities in Puebla, Mexico.
Some Hard Facts
- 4 billion USD growth between 2021 - 2026
- Over 500,000 employees in the apparel & textile sector
- 75% account for the apparel sector
- 400+ companies with 130,000 emploees are Immex Program certified
Appliances
Several large international appliance manufacturers have production facilities in Mexico, including Samsung, LG, Whirlpool, General Electric, or LG. These companies have taken advantage of Mexico's proximity and access to the market of the United States, relatively low labor costs, and favorable business environment.
They are producing various products such as freezers, dishwashing machines, washing machines, ovens and refrigerators.
Some Hard Facts
- 2nd largest exporter of appliances to the United States
- 5th largest producer of household appliances
- 14,800 million dollars worth of production
- 8% growth in 2023 projected
- Over 40% electrical appliances are produced in Nuevo Leon
- 3,500+ appliance companies in Mexico
- 60% export share in TV to the United States
- 85% of the appliance exports go to the United States
Electronics
Mexico is one of the main producer of screens, televisions and many other electronic products. There are various key market players like Samsung, LG, GoPro, Dell or Sony with their production places in Mexico. Thanks to the trade agreement USMCA with the United States and Canada, Mexico is the second largest exporter of electronics to the United States and the eight largest manufacturer of electronics overall.
Most manufacturing clusters are in the states of Baja California, Chihuahua and Jalisco.
Some Hard Facts
- 8th largest producer of electronics worldwide
- 5.3% of Mexicos manufacturing GDP comes from electronics
- 150 billion USD annual exports in electronics
- 19 million Samsung TV units in Tijuana
- +500,000 workforce work in electronic
- largest exporter of flatscreen TVs.
- 2,500+ electronic manufacturers
Furniture
As the furniture industry is a very competitive market with low prices and accordingly low margins, many companies’ goal is to have an efficient supply chain and being close to its customers. Thus the demand for more furniture at a cost-effective price is pushing more manufacturers to consider low-cost manufacturing locations.
Mexico is the perfect spot to settle down its productions as the country has already several decades of experience in manufacturing furniture as well as the competitive prices it can offer.
Indeed , Mexico exported $10.675 billion dollars’ worth of furniture in 2017 and there are over 700 furniture manufacturing industry with more than 52,000 employees working in this sector. As an example, The Mexican furniture industry is the third largest exporter of chairs in the world, second only to China and Poland.
Some Hard Facts
- 6%+ growth in 2023
- $10.5 billion export in 2017
- 700+ furniture companies
- 55k+ employees
- 700+ furniture manufacturing companies in Mexico
- $2.5 billion+ exports of furniture to the United States
Medical Devices
The medical device manufacturing industry in Mexico continues to experience favorable growth. Over the past decades, over 600 medical device manufacturers have leveraged nearshore operations along the U.S./Mexico border regions, which is responsible for having nearly 160,000 workforce and over $9 billion annually in exports.
Mexico is well-known for manufacturing cardiovascular devices, orthopedic devices, and dental devices. One of the greatest benefit of nearshoring medical device manufacturing to Mexico is that the country offers a highly-trained and educated workforce.
Some Hard Facts
- 20%+ costs in manufacturing can be saved compared to the United States
- 50% of national exports is done by Baja California
- 220+ companies manufacturing medical devices
- 90% of the medical devices are exported to the United States
Information Technology
The information technology (IT) industry in Mexico has experienced significant growth in recent years. It is one of the largest in Latin America, with an estimated value of $48 billion in 2021, according to the Mexican Association of Information Technology Companies
The sector encompasses several sub-sectors, including IT services, hardware manufacturing, software development, and e-commerce. Software development is the largest sub-sector, accounting for around 60% of the industry's value.
In addition, the country has become an attractive destination for foreign investment in the IT industry, with several multinational companies establishing a presence in the country.
Some Hard Facts
- 110k+ engineering graduates per year
- 3rd largest IT exporter in the world
- 21 billion in exports
- 40+ IT clusters
Raw Material
Mexico’s favorable business environment and diverse economy make it an attractive location for companies looking to source raw materials or set up manufacturing operations.
The country is rich if not abundant of raw materials such as oil and petroleum products to mining, coal, silver, gold copper, zinc, minerals, automotive parts, agriculture, electronics, textiles, chemicals, plastics, and electrical equipment.
Some Hard Facts
- world’s largest producer of silver
- 2.5 million work in the mining industry
- 45.4 B cu m of natural gas production in 2017
- 11th largest oil producer worldwide
