You are on page 1of 2

14 Negocios

Photos archive

reigniting the engines


mexico has estaBlished itself as an attractive destination for aUtomotive sector investment. the worlds largest aUto companies have placed their faith in the prodUction platform that mexico provides for manUfactUring vehicles to Be sold in a variety of markets aroUnd the world. today mexican manUfactUred vehicles are among those with the largest volUme of sales for their respective Brands.

lobally, the automotive industry is an engine of development. It plays a strategic role in national economies not only because it is an important source of investment and employment but also because it fosters the development of other high value added sectors. Mexico is a clear example. Historically, the automotive industry has been a strategic sector for Mexicos development. On the basis of the jobs it creates and the foreign exchange it generates, its share of the national economy makes it the second largest industry in Mexico, surpassed only by the oil industry. In addition, this industry has paved the way for competitiveness in regions where automotive companies have been established. This in turn has led to more highly skilled and highly paid jobs among other results and to greater development of human capital. By the same token, the industry has created a major cascade of technical capabilities that are being applied in other sectors, such as electricity, electronics and aerospace. Mexico provides automotive companies with tremendous business opportunities. This is due to the strength of a unique market that has transformed into one of the centers of the global automotive industry. In the global automotive sector, Mexico has become an export platform. The largest companies in the world are increasingly utilizing Mexico as the sole supplier of some of their newest products. Al-

though the industry has been affected by the economic crisis, its resilience has enabled it to weather the economic downturn. Thus, Mexico has managed to forge ahead and become a strong player in the global market. In the past fifteen years, foreign companies in Mexico have established a number of assembly plants. The competitive advantage of vehicles and engines manufactured in Mexico stems from low labor costs and technological innovation. Furthermore, Mexico offers important tax benefits to multinational automotive companies seeking to establish assembly plants in the country . In recent years, this has led major manufacturers to strengthen their presence in Mexico, solidifying the countrys status as a center of automotive production. These major market players have also invested in compact and subcompact vehicles, relying on the fact that Mexico offers one of the best platforms to meet the growing export demand for smaller cars by consumers worldwide. Seven of the worlds largest manufacturers have chosen Mexico as their production center and export platform, some of which have been operating in the country for more than eight decades. Only three American manufacturers, GM, Ford, and Chrysler, the leading German carmaker Volkswagen, and major Japanese companies such as Nissan, Honda, and Toyota operate assembly plants in Mexico, and together produce 40 car models in the country. In 2008 alone, companies like GM, Ford and VW announced

investments totally more than 7 billion USD for the manufacture of entire vehicles and engines and transmissions, among other parts. The role of the automotive industry in the Mexican economy is critical, given the impact it has on other core industries such as steel, glass, and rubber. It is regarded as an industry that substantially impacts the countrys economic welfare. With an output of more than 58 million units in 2010, Mexico reaffirmed its position as the ninth largest producer of vehicles worldwide. The automotive industry is the secondmost strategic sector of the Mexican economy after the oil industry and the most important subsector of the manufacturing industry. Foreign sales continue to be the primary focus of vehicle production in Mexico. Given the geographic proximity and economic and business links between Mexico and the US, 81% of Mexican automobile production is intended for export, with 80% of the manufactured vehicles going to the US 11 out of every 100 vehicles sold in the US are made in Mexico, 11% to Latin America and 9% to the European Union. A majority of the main North American, European and to a lesser degree Asian (primarily Japanese and Korean) auto parts companies have established operations in Mexico. There are about one thousand auto parts companies in Mexico, of which 70% are foreign owned and 30% are domestically owned. Of all companies in this sector, 34.5%

SPecial feaTure mexican aUtomotive indUstry

are first tier manufacturers (direct suppliers to the finished goods industry). These companies offer faster and more streamlined supply for these systems, and adjust to the quality needs established by the assembly plants. The remaining companies manufacture inputs and raw materials supplies at the second and third tiers of the production chain. Owing to new production systems implemented by the finished goods industry to increase its productivity, some of which require just-in-time delivery of parts directly to the plant site assembling that part of the vehicle, first-tier suppliers have a close relationship with auto manufacturers and take on more responsibility in the manufacturing process of the final product. Thus, the finished goods industry is increasingly becoming what could be considered a subcontractor of supplier companies that are directly involved in the production process, since the suppliers integrate systems (and not just parts) directly in the production line. The most dynamic export activity is evident in products such as harnesses, seats, gasoline motors, body parts, security modules for airbag systems, and seatbelts, a part for which Mexican industrial production is very competitive globally. n