Mexico’s auto industry is surging, but we still rule

By Michael Randle, Editor

Amazingly, Mexico has captured nine out of the last 11 announced new automotive assembly plants in North America since 2010. The South landed the other two. The Center for Automotive Research (CAR) estimates that light vehicle production in Mexico will top 5 million units by the end of the decade. As late as 2013, Mexico produced only 1.7 million units, and last year about 3.5 million vehicles were assembled there. But the new factories in Mexico that are not operating as of yet — including plants by BMW, Nissan/Daimler, Kia, Toyota, Ford and Audi — are expected to boost vehicle production dramatically in the next few years. 

 

Last year, the U.S. (the Midwest and the South) produced about 12 million units. In Canada, where the automotive industry is declining, only a little more than 2 million cars were built in 2015. 

 

According to CAR, the U.S. and the Southern Auto Corridor are not losing existing production to Mexico like some other countries. Major assembly plants announced in Mexico have come at the expense of plant closures in countries such as Germany and Japan. Yet, there is no question that the South has lost out on the economic growth of new assembly plants it would have captured had they not been built in Mexico. 

 

The benefits of making cars in Mexico aren’t numerous. There are plenty of issues for automakers in Mexico. However, it costs on average about $1,200 a vehicle less overall to make an automobile in Mexico as opposed to the U.S., according to CAR.

 

More importantly for automakers, Mexico has the export benefits of more than 40 different free trade agreements with other nations, more than double the free trade agreements the U.S. has with other countries. President Obama’s campaigns for FTAs with Europe and Asia are still pending. All the while, Mexico has tariff-free access to almost 50 percent of the global new vehicle market, by far the biggest attraction for automakers. 

 

Regardless, the automotive industry in the U.S. dwarfs that of Mexico. The U.S. is home to 45 light vehicle assembly plants with another two being built. That’s more than double the number in Mexico, including all of the plants announced but not completed.

 

The auto parts supply chain is also much stronger in the U.S. than in Mexico. CAR estimates that vehicles produced in Mexico “may be comprised of up to 40 percent U.S. content.” Furthermore, according to Michigan-based CAR, parts makers invested $3.4 billion in the last 10 years in Mexico compared to over $44 billion invested in the U.S. during the same time frame. In Canada, parts manufacturers invested just $580 million since 2006. 

 

In total, from the end of the recession through 2015, the auto industry as a whole — including OEMs — invested $80.7 billion in U.S. operations compared to $25.8 billion in Mexico.