As we saw in an earlier post – Where are Mexico’s vehicle assembly plants located? – Mexico’s autoparts and vehicle assembly industry plays a vital role in Mexico’s economy, attracting foreign direct investment (FDI), providing employment and bringing in billions of dollars in export earnings each year.
Mexico also has a large internal (domestic) market for vehicles. According to the Mexican Automotive Distributors’ Association, 820,000 vehicles were sold on the national market in 2010. The market leader is Nissan (with 23.5% of the domestic market), followed by General Motors (19.5%) and Volkswagen (13.2%). Mexico’s best-selling cars are the Nissan Tsuru/V16 and the Volkswagen Jetta. Nissan aims to have domestic suppliers for 90% of all its components by the end of 2011.
Why has Mexico become one of the world’s top ten vehicle-making countries?
- Mexico already had a highly competitive manufacturing sector
- Mexico has an excellent communications network, with several trans-border highways and rail lines, as well as several major ports. This means lower shipping costs
- Stable exchange rate
- Significant domestic market (population 112 million)
- Mexico has formed an outstanding network of trade and investment agreements. Mexico has the world’s largest free trade agreements network, spanning three continents, and offers preferential tariffs to more than 44 countries.
- Competitive labor costs
- Responsible federal fiscal policies have increased the resilience of the national economy
- Availability of skilled labor and well-educated, multilingual managers
- Proximity to the USA, both for investments and for markets
- Lower production costs: since 2009, the manufacturing costs for vehicles in Mexico has been between 80% and 90% of the equivalent cost in the USA.
- Total production and delivery costs: For vehicles sold in the USA, costs are lower for vehicles made in Mexico than for those made anywhere else, including China, India and Brazil.
- Government support: To stimulate higher-value activities (engineering, design, testing, R&D), Mexico’s government offers numerous incentives, including job training and tax credits.
Vehicles made in Mexico are high quality
Mexican manufacturing plants have consistently done well in the annual quality surveys undertaken by market research firm JD Power and Associates. The study has been conducted annually for the past 17 years and provides an important benchmark for the automotive sector. Vehicles made in Mexico usually have fewer defects than those made in the USA. In 2008, the Toyota plant in Baja California won the award for the top ranking plant in the Americas.
The top ten manufacturers:
According to the latest figures from the International Organization of Motor Vehicle Manufacturers (OICA), Mexico was the world’s 9 th largest vehicle-maker (2.2 million vehicles) in 2010, behind China, Japan, USA, Germany, South Korea, Brazil, India and Spain, but ahead of France, Canada, UK, Italy and Russia.
For more facts and figures (with graphs and maps useful for teaching purposes): Mexico and the Automotive Industry, a strategic place to invest. Gerardo Ruiz Mateos, Ministry of Economy. June 2010. (pdf file)