¡Feliz Navidad! – Happy Christmas!

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Dec 242017
 

Some parts of Mexico have been working on Christmas for most of the year… For example, the manufacturing of beautiful handmade Christmas tree decorations is the main industry today in the former gold and silver mining town of Tlalpujahua in the state of Michoacán. The production of Christmas ornaments in Tlapujahua has a great series of photos by Arturo Toraya of Notimex, showing some of the steps involved.

ornaments-2

As the accompanying text explains, “Making baubles for Christmas trees is the main source of jobs in the town, which is now one of the top five producers in the world. Due to their quality, 90 percent of the total production is exported to the U.S. and Canada. There are 200 family workshops in the town with seven-hour shifts, and each worker can make up to 550 baubles per day. Each workshop decorates about 500 per day. Red, blue, green and yellow are the top selling colors in Mexico, while black, brown and grey are more popular in the U.S.”

The village of Tzintzuntzan, on the shores of Lake Pátzcuaro, also in Michoacán, is another settlement where Christmas seems to be a year-round source of inspiration. The village handicraft market is a cornucopia of straw work in every conceivable color, design and size, which make ideal Christmas decorations or gifts.

Happy Christmas from Geo-Mexico! – ¡Feliz Navidad!

Craft market in Tzintzuntzan, Michoacan

Craft market in Tzintzuntzan, Michoacan

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Chinese imports threaten bicycle manufacturing in Mexico

 Mexico's geography in the Press  2 Responses »
Oct 152015
 

Since we first reported on Bicycle manufacturing in Mexico in 2010, a number of things have changed.

At that time, the website of the National Association of Bicycle Manufacturers claimed that its 14 member companies produced about 3 million bikes a year and employed, between them, 4,000 workers. Today, the group has fewer members – 12 – who make “over 2 million” bikes a year and provide 3,000 jobs.

Stamp of Bike exports

The Mexican bicycle manufacturing industry looks like it has to overcome a tough problem. Recent press reports suggest that the total number of bicycles produced nationally fell to around 1.8 million in 2014. Manufacturers are blaming the uncontrolled imports of less expensive bikes made in China. Gunter Maerker, a representative of the National Association of Bicycle Manufacturers, argues that manufacturers need greater protection from Chinese imports, which have an average cost of about 7 dollars a unit, compared to a unit cost of production that is closer to 20 dollars to make a bicycle in Mexico.

Domestic manufacturers sold 1.5 million bikes in the national market in 2014. Mexican manufacturers believe that sales of imported bikes equaled or exceeded that number. The fall in national bicycle manufacturing has already had impacts on suppliers of components since national bikes are made largely of domestically-manufactured parts (along with some items sourced in China or Taiwan).

Mexican bicycle manufacturers are also worried about the implementation of the Trans-Pacific Partnership (TPP), agreed in principle earlier this month, but still needing formal approval in all signatory countries. The 12 countries involved are Mexico, the U.S., Canada, Chile, Peru, Australia, Japan, Brunei, Malaysia, New Zealand, Singapore and Vietnam.

China has had no part in TPP discussions, but it is feared that Chinese manufacturers may triangulate their products into Mexico via signatory countries such as Malaysia or Vietnam.

In 2015, the National Association of Bicycle Manufacturers lists 12 bike manufacturers:

  • Bicicletas Cinelli – Santa Catarina, Nuevo León
  • Nahel – Durango, Durango
  • Goray – Torreón, Coahuila
  • Grupo Veloci – Zapopan, Jalisco
  • Rebimo de Guadalajara – Zapopan, Jalisco
  • Bicicletas Mercurio, Mérida and San Luis Potosí (they acquired the famous Acer-Mex Windsor brand in 2001)
  • Bimex – Mexico City
  • Magistroni – Mexico City
  • Benotto (primarily a distributor) – Mexico City
  • Grupo Oriental – Mexico City
  • Corporativo La Bici – Mexico City
  • Bicileyca – Yauhquemehcan, Tlaxcala

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Mexico’s multinationals: Mexichem, a world leader for PVC pipes and other products

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Sep 202015
 

Mexichem is a Mexican chemical and petrochemicals company (2014 total revenues: US$ 5.6 billion), with headquarters in Tlalnepantla, in Greater Mexico City. Mexichem is a world leader in making and marketing plastic pipes and other products required in the infrastructure, housing, telecommunications, drinking and potable water sectors.

It employs 19,200 workers and has 120 manufacturing operations in more than 30 countries, with a sales presence in 90 countries.

Mexichem operations, 2015

Mexichem operations, 2015 (Source: mexichem.com)

The company’s origins date back to 1953 when a group of Mexican and English investors founded Cables Mexicanos S.A. to make high carbon steel wire ropes. Several changes of name and owners later, it emerged in 2005 as Mexichem. Mexichem has grown rapidly since then, largely due to an aggressive series of acquisitions.

In 2006, Mexichem bought Bayshore Group (PVC compounding). In 2007, it bought Amanco (PVC pipe systems and fittings), Petroquímica Colombiana (maker of PVC resins) and DVG, Industria e Comércio de Plásticos (producer of rigid PVC water and sewage pipes).

In 2008 Mexichem acquired Fluorita de Río Verde (fluorspar production plants and two fluorite mining concessions), Quimir (sodium phosphates), Geotextiles del Perú (geotextiles), Fiberweb Bidim Industria e Comércio de Não-Tecidos (Brazilian geotextile producer) and Colpozos (Colombia’s leading supplier of irrigation and well drilling systems).

The list goes on in succeeding years, with a succession of acquisitions of companies making PVC pipes, connections, polymers, resins, and fluorochemical competitors to become a world leader in the fluorine chemical segment, particularly in the production of refrigerant and medical gases.

mexichem-fluor

To consolidate its fluorite business, in 2012, Mexichem bought Fluorita de México, ensuring access to the highest pure fluorspar available worldwide.

Mexichem has four main business divisions:

  • Pipe systems, fittings, conduits and plastic accessories for the delivery of data, video, communications, electricity, water and gas. The pipe systems are made from polyethylene, PVC, polypropylene and specialty flame and smoke resistant compounds.
  • PVC resin and valuable industrial compounds based on chlorine and caustic soda. PVC has uses from pipes that carry drinking water, wastewater or water for irrigation to construction materials and products, as well as  auto parts, household appliances, clothing, footwear, packaging and medical devices. Caustic soda is used to make soap, shampoo, lotions and detergents and to treat water.
  • Fluorine-based products, technologies and services. Mexichem’s “Mine to Market” structure ensures a secure supply chain of flourine-based products for the steel, cement, aluminum, automotive, refrigeration and pharmaceutical sectors.
  • Energy. This division was created in 2014 in order to capitalize on opportunities arising from Mexico’s new energy policies.

A note on Mexico’s importance for fluorite

Exports of fluorite from Mexico were worth $180.7 million in 2014 (29% of the world total), making Mexico the world’s leading exporter of that mineral, ahead of China ($120.2 m). In 2014, Mexico mined 1.1 million metric tons of fluorite, and was the world’s second largest producer after China (4.4 million tons).

Mexichem sits on the world’s largest high-grade fluorite deposits, in its mine in San Luis Potosí. It produced 529,464 metric tons of fluorite from this mine in the first six months of 2015, 96% of the national total.

The world’s largest total reserves of fluorite are in South Africa (41 million tons), followed by Mexico (32 million), China (24 million) and Mongolia (22 million), according to U.S. government figures.

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Nava brewery in Coahuila: the largest brewery of its kind in the world

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Mar 052015
 

The Nava brewery, which started operations in May 2010, was built by Grupo Modelo but subsequently sold in 2013 to Constellation Brands, the U.S. company that holds the rights to import Modelo products into the U.S.

Nava brewery

Nava brewery. Credit: Constellation Brands

Constellation Brands (founded in 1945 and based in Victor, New York) is a leading international producer and marketer of beer, wine and spirits with operations in the U.S., Canada, Mexico, New Zealand and Italy.

The Nava brewery is the world’s largest brewery of its kind (see this video overview from company webpage), with about 2000 employees and a brewing capacity of 20 million hectoliters of beer a year. A planned expansion (see 26-second video) will increase capacity to 30 million hectoliters.The plant produces Grupo Modelo brands such as Corona, Corona Light, Negra Modelo and Modelo Especial, under license for export to the U.S.

Where is it?

The beer brewery and bottling plant is located in the Nava municipality in the northern state of Coahuila, about 21 km (13 mi) from the border town of Piedras Negras. It is built alongside highway 57 and spreads over 334 hectares (825 acres) of a greenfield site.

Why is it located in Nava?

The major advantages of this location include:

  • the availability of good quality water
  • proximity to the U.S. border and the U.S. beer market
  • presence of good road, rail and power infrastructure

How does the brewery work?

The brewery is a three-story brewhouse with large metal silos, about 1.6 km (1 mi) of conveyors and four pasteurizers. The facility consists of two brewhouses with malt intake, vacuum evaporation and energy recovery systems, 70 cylindro-conical fermentation and storage tanks, seven clean-in-place (CIP) stations, a yeast cellar with 16 tanks and continuous microfiltration (CMF), 30 pressure tanks and three filtration lines with 1,200 hectoliters/hour capacity each, and a Siemens automated process control system.

The brewery uses rice, barley malt, corn grits and water to produce beer. The feedstock is transported by trains to the plant and stored in silos. A 60 km (37 mi) pipeline connects the brewery to a mountain aquifer supplying about 20 million cubic meters of water a year. The site includes its own wastewater treatment plant.

A raw materials supply system handles the raw materials in bulk and conveys them to the brewhouse, where they first enter a collection bin, and then a mash tun, where water is added. The mixture is then pumped along a pipeline to the cereal cooker of the brewhouse.

Two brew systems consisting of mash tuns and cereal cookers are designed to efficiently use the internal heat. These heaters can also clean them automatically by CIP (clean-in-place) technology. Fermentation takes place in unitanks configured with automated clarification, purging systems and turbidity monitoring. The brewery consumes less than 3 liters of water for each liter of beer. The carbon dioxide reclamation capacity of the brewhouse is about 4,000 kg/hour.

The three bottling lines have the capacity to handle 144,000 bottles/hour, while a canning line outputs up to 66,000 cans/hour.

Filling, pasteurizing and cap feeding is handled by 37 robotic machines. Output is linked to the warehouse by automated trolleys. The automated warehouse is equipped with digisat satellite, a state-of-the-art warehouse management system, and can store about 63,000 pallets.

The high level of automation means that this beer manufacturing and bottling plant has operational costs about 40% lower than the seven older breweries that still belong to Grupo Modelo.

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Mexico’s vehicle industry

 Teaching ideas, Updates to Geo-Mexico  Comments Off on Mexico’s vehicle industry
Dec 272014
 

Mexico is one of the world’s “Top Ten” countries for vehicle production and for vehicle exports. In 2014, it has overtaken Brazil to become the world’s 7th largest vehicle producer and fourth largest exporter. 80% of Mexico’s production of around 3.3 million vehicles in 2014 were made for export. The trade surplus generated by the automotive sector exceeded 47 billion dollars in 2014.

auto-exports-forbes

Mexico’s vehicle exports in 2014. Credit: Forbes, México.

The industry attracts large amounts of Foreign Direct Investment (FDI). Vehicle assembly plants provide around 65,000 jobs, with a further 85,000 employed in distributorships nationwide and a whopping 450,000 employed in the autoparts sector.

The autoparts sector along produces items worth $80 billion/year, but Mexico also has to import components made elsewhere worth a further $35 billion. Clearly, this offers some opportunities for additional investment aimed at import substitution. Most of the opportunities are likely to be for Tier 2 companies. It is customary to divide the autoparts sector into three distinct parts: OEM, Tier 1 and Tier 2. OEM (Original equipment manufacturer) refers to companies that make a final product for the consumer marketplace (eg Volkswagen). Tier 1 companies are direct suppliers of components to OEMs, and Tier 2 companies are the key suppliers of parts or raw materials to Tier 1 suppliers.

Total production in 2014 topped the 3 million barrier, and the Mexican Automotive Industry Association (AMIA) believes production could reach 4 million units by 2015 and 5 million by 2020.According to  AMIA, the best selling models on the domestic market are the Aveo (GM), Jetta (VW), Versa and Tsuru (both Nissan).

There are about 30 vehicle assembly plants in Mexico, manufacturing many brands of cars and trucks (see map). In addition, there are 1200 firms specializing in making parts for vehicles.

Vehicle manufacturing firms that have announced or confirmed major new investments during 2014 include:

  • Chrysler – 1.25 billion dollars to expand its assembly plant in Saltillo and manufacture a new line of Tigershark engines.
  • Nissan – to open its second plant in Aguascalientes.
  • Mazda – an additional 120 million dollars for its plant in Salamanca (Guanajuato), where it will manufacture several Mazda models as well as one Toyota model.
  • GM – investments worth 690 million dollars, divided  between its plants in Silao (Guanajuato), San Luis Potosí and Toluca (State of México).
  • Audi – about to open a 1.3-billion-dollar plant in San Jose Chiapa, near Puebla.
  • VW – 700 million dollars investment to adapt production lines in Puebla to produce its redesigned Golf hatchback.
  • Kia – plans to build a $1 billion vehicle assembly plant at Pesquería in the state of Nuevo Leon (scheduled to open in 2016) to produce up to 300,000 vehicles a year. The new plant is expected to generate a further 1.5 billion dollars in investment from firms seeking to join Kia’s supply chain.

This map is an updated version of the map we included in Where are Mexico’s vehicle assembly plants located? (2011).

Vehicle assembly plants in Mexico, 2014

Vehicle assembly plants in Mexico, 2014. Credit: Tony Burton/Geo-Mexico; all rights reserved.

As the map shows, certain areas of Mexico have attracted more investment in vehicle assembly plants than other areas. The two largest existing concentrations are focused on Toluca in the State of México, and on Saltillo-Ramos Arizpe in northern Mexico. However, the fastest growing cluster is in the central state of Guanajuato.

Virtual visit to the Chrysler plant in Saltillo (video, no commentary):

For a series of discussion questions related to this map and the vehicle assembly industry, see our earlier post – Where are Mexico’s vehicle assembly plants located?

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Mexico’s multinationals: Mabe, domestic appliance manufacturer

 Updates to Geo-Mexico  3 Responses »
Aug 042014
 

Mabe is one of Mexico’s largest multinational companies (2013 sales: $3.3 billion) with a total workforce of 21,000. The company designs, produces, and distributes domestic appliances (stoves, refrigerators, etc) to more than 70 countries.

mabe-plantThe company was founded in 1946, in Mexico City, by two Spanish immigrants: Egon Mabardi and Francisco Berrondo. It started by making kitchen furniture but quickly added gas ranges and refrigerators. By 1960, Mabe had already become Mexico’s single largest exporter of home appliances.

It continued to expand via an aggressive series of acquisitions, including the purchase of companies in Venezuela, Ecuador, Colombia, Brazil, Peru, Argentina and Canada.

To boost its presence in the USA and Canada, in 1986 Mabe created a joint venture with General Electric to produce appliances for the US market.

mabe-sales

Mabe sales, by region

GE held a 48% minority stake in the new venture and hoped to gain access to Mexico’s low cost labor pool, while Mabe was able to use GE’s existing distribution network to gain wider access to markets throughout the USA. Within a decade, two out of every three gas ranges and refrigerators imported into the USA were designed and manufactured by Mabe in Mexico. Almost all (95%) of the ranges and refrigerators sold as General Electric brands were designed in Mabe’s San Luis Potosi plant, the biggest kitchens plant in the world.

The implementation of NAFTA in 1994 led to further opportunities for Mabe. Since NAFTA, Mexico has become the leading supplier of household appliances, such as stoves, refrigerators, dryers and washing machines to the USA and Canada. In 2005, Mabe continued its expansion by acquiring Canadian firm Camco.

NAFTA also led to the firms competitors, including Whirlpool, Electrolux, Samsung and LG all establishing factories in Mexico.

The company, which is still headquartered in Mexico City, is a major purchaser of steel on the North American market, consuming steel worth around $500,000 each year. Its products include microwaves, washing machines and dryers, wine storage systems, air conditioning, motor-compressors, plastic injection and die-casting machinery.

It has about 15 manufacturing facilities in Latin America. The company’s factories in Mexico –located in Mexico City, Coahuila, Guanajuato, Nuevo León, Querétaro and San Luis Potosí– account for half its total output. In addition, refrigerators and ranges are manufactured in Colombia; freezers, refrigerators and ranges in Ecuador, and refrigerators, washing machines and ranges in Argentina and Brazil.

Mabe’s business practices incorporate a degree of “glocalization” in which the company’s designs are modified to be specific to particular regions, based on the consumer preferences and tastes in each country or region.

In 2014, Mabe announced that it was spending $80 million to repatriate its only Canadian plant from Montreal to Ramos Arizpe, Coahuila. The plant makes washing machines, driers and dishwashers. Together with Mabe’s existing plant in Ramos Arizpe, the two plants have the capacity to turn out about one million washing machines annually.

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León hosts Latin America’s largest trade fair for footwear

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Mar 262014
 

Mexico’s footwear industry is heavily concentrated in three main cities: León, Guadalajara and Mexico City. Factories and workshops in the city of León in the state of Guanajuato account for about 68% of all shoes made in Mexico. The two other important manufacturing areas for footwear are Guadalajara (Jalisco) where about 18% of the national production originates, and Mexico City (together with surrounding parts of the State of Mexico), responsible for 12%.

Footwear industry in Mexico

Concentration of shoe industry in Mexico.

According to the 2009 Economic Census, there were close to 7500 “productive units” related to shoe manufacturing in Mexico, with about half of them located in the state of Guanajuato. In 2012, national producers turned out 244 million pairs of footwear, of which 171 million pairs (70%) were made in Guanajuato.

Shoes are also an important international trade item. In 2013, shoe exports reached 26 million pairs, worth almost $600 million (an increase of 14% compared to 2012). The main export markets were the USA, Canada, Colombia, Guatemala, Panama and Japan.

Mexico’s shoe industry hosts several major trade fairs each year. The single biggest event, SAPICA (Salón de la Piel y el Calzado), is Latin America’s largest international footwear trade fair and is held in León twice a year. The next SAPICA trade fair opens today and runs 26-29 March 2014 in León, Guanajuato. This show has 45,000 square meters of exhibition space, more than 2000 stands and 850 presentations. SAPICA has gained international recognition and attracts 11,000 buyers (from the USA, Canada, Europe, Japan, and Central and South America) and 35,000 visitors each year.

The flexibility of León’s shoe manufacturing industry has enabled firms such as Poppy Barley (based in Edmonton, Canada) to be able to market custom-made boots via their website and without the overheads of any conventional footwear stores . Individual purchasers take their own foot measurements, and then the boots are made to order and shipped to their homes. This “made to measure digital retail” approach flies in the face of the mass production that has become the norm in the footwear industry. The Poppy Barley website includes a section devoted to its manufacturing partner in León.

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Trends in Mexico’s commercial and industrial property markets

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Mar 062014
 

In The market for commercial and industrial real estate in Mexico, we looked at a recent snapshot of the industrial real estate market in the last quarter of 2013, and saw how cities in the Bajío Region were outpacing cities in Central Mexico or Northern Mexico. (The snapshot came from the report ‘Industrial Markets in México (Q4 2013)‘ by Jones Lang LaSalle, a global real estate services firm.)

In this post, we take a look at the “Industrial Property Clock” for the same period, from the same report.

Industrial property clock (Jones Lang LaSalle)

Industrial property clock (Jones Lang LaSalle)

In general, cities in Central Mexico and in the Bajío are well “ahead” of cities in northern Mexico on this clock. The analysis by Jones Lang LaSalle suggests that the commercial and industrial property markets in Mexico City, Guanajuato, Guadalajara, San Luis Potosí, Puebla and Toluca are “peaking”. The two remaining cities in the Bahío (Querétaro and Aguascalientes) are joined by several cities in northern Mexico in the “rising market” portion of the graph, while Reynosa, Matamoros, Nuevo Laredo and Chihuahua are anchored in the “bottoming market” portion.

The following quotes are taken from the report:

• Mexico City’s industrial market grows its footprint annually; rents have grown to pre-crisis levels

• Puebla market is very tight; land is scarce and vacancy is at a low

• Toluca market has been growing as an alternative to Mexico City, it is also attracting local businesses

• Guanajuato is growing in several submarkets like Silao and Celaya thanks to car manufacturing and food related businesses

• Guadalajara keeps occupying space and growing at El Salto and South Periférico

• San Luis Potosí keeps attracting new industries related to consumer goods. The car manufacturing industry is taking advantage of the city’s communications and infrastructure

•Querétaro has been active inaugurating new developments near the airport both for the aerospace business and for car manufacturing. These industries have taken advantage of the local educated labor force

• Aguascalientes seems to be the new frontier for developers: at least three major national developers have inaugurated parks in this market, one of them is Nissan’s supplier park

• Tijuana continues its path towards quickly becoming a speculative development marketplace once again. It is the first border city to regain this business climate

• Nogales, the smallest of the Northwest Border region cities, is also enjoying the expansion of Kimberly Clark (KCI) leasing vacant space within the Nuevo Nogales Industrial Park

• Ciudad Juárez keeps lowering the existing vacancy rate

• Monterrey submarkets have been improving, especially Apodaca and Santa Catarina, where land prices and rents are growing

• Nuevo Laredo, Reynosa and Matamoros have seen a slow down in their activities, however, tenants have stayed at their buildings; there are no new developments on the horizon and vacancy rates are around 10%

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The market for commercial and industrial real estate in Mexico

 Mexico's geography in the Press, Other  Comments Off on The market for commercial and industrial real estate in Mexico
Mar 012014
 

A recent snapshot of the industrial real estate market in the last quarter of 2013 compares progress in three industrial regions in Mexico: Northern Mexico, Central Mexico and the Bajío Region. The snapshot comes from the report ‘Industrial Markets in México (Q4 2013)‘ by Jones Lang LaSalle, a global real estate services firm specializing in commercial property management, leasing, and investment management.

Cities included in industrial real estate study

Cities included in industrial real estate study (Jones Lang LaSalle)

The pattern of commercial and industrial real estate in Mexico

The five main cities of the Bajío Region (Aguascalientes, Guadalajara, Guanajuato, Querétaro and San Luis Potosí) are booming in terms of commercial and industrial real estate. In the final quarter of 2013, the region added about 550,000 m2 of commercial and industrial space. This was more than double the additional space added in Central Mexico (Mexico City, Toluca and Puebla) and close to the total amount (614,000 m2) spread between 10 cities in northern Mexico (see map).

In the North Region, “Tijuana has been occupying vacant space… and Ciudad Juárez is on its way to recovering from low rents and high vacancy”, while the automotive sector is driving growth in Saltillo-Ramos Arizpe.

The Central Region is helped “by third party logistics companies that grow their business and footprint in Mexico City’s surroundings”, while “Toluca and Puebla grew mainly because of the car manufacturing demand for space.” Commercial rents rose in Mexico City and in Toluca. “Big Box requirements keep driving this market. Development has been very active at the Tepotzotlán toll booth surroundings.”

The Bajío Region has consolidated “with new industrial parks related not only to the new car manufacturing plants, but also for new investments related to aerospace, food and personal consumer” products.

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Tultepec: the fireworks capital of Mexico

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May 252013
 

No Mexican festival is complete without a dazzling display of fireworks. Gunpowder was unknown in Mexico prior to the arrival of the Spaniards, but its use in fireworks quickly caught on. Firework production is usually a small-scale family affair, and there are workshops specializing in fireworks throughout the country. The undisputed  capital of fireworks is Tultepec, a settlement with 130,000 inhabitants on the northern edge of Mexico City. Generations of expertise have led to Tultepec becoming the source for about half of all the fireworks manufactured in Mexico.

  • Tultepec: Mexico’s Skyrocket Central from The Southwest Center, by Dan Duncan (26-min video)

To celebrate its skilled pyrotechnic craftsmen, Tultepec hosts a 9-day National Pyrotechnic Festival in March each year. The festival, first held in 1989, includes competitions for the best castillos (castles) and toros (bulls) or toritos (little bulls). Castillos can be several stories high, with an intricate interconnected network of sections representing saints, animals, flowers, birds and other designs. Toritos, first recorded in the nineteenth century, are bull-shaped frames placed over the heads of willing volunteers. As the firecrackers explode, the toritos are carried through the streets or dance in imitation of a bull fight as young bystanders pretend to be matadors. About 250 toritos ran the streets of Tultepec in 2013.

The manufacturing of fireworks is tightly controlled by the military, but accidents are all too common and often serious, sometimes fatal. About 2,000 people work directly in the industry, in some 300 small workshops. The creativity of these coheteros (fireworks makers) knows few limits. For example, mid-way through this video, look for the small, firework-propelled vehicle that goes alternately forwards, then backwards, entirely on its own once its fuse has been ignited.

Want to read more?

  • Mexico’s Fireworks Capital by Matthew Power

Globalization: Mexico exports almost all motor vehicles it produces, but imports new cars

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Jan 082013
 

Which company exports the most motor vehicles in Mexico? In term of units exported, Ford was the leader with 449,925 units. Ford exported over 97% of the vehicles it made in Mexico in 2011. Though Ford sold many new cars in Mexico, virtually all were imports, mainly from the USA or Canada. GM was a relatively close second with 443,237 vehicles exported, 81% of the total produced.

VW was next with 439,925 units exported, 84% of their total. Nissan was fourth with 411,660 vehicles exported which was a significantly lower percentage (68%) of its total production. Nissan sells about a third of its Mexican produced vehicles in Mexico, by far the highest percentage among auto manufacturers in Mexico.

Chrysler/Fiat exported 266,117 vehicles, 79% of their total production. Toyota was next with 49,549 vehicles exported for an amazing 99.9% of the total manufactured. Surprisingly only 47 of the almost 50,000 Toyotas made in Mexico in 2011 were sold in Mexico; all of the rest were exported to the USA or Canada. Virtually all of the thousands of new Toyotas sold in Mexico are imported. This is a very extreme case of globalization at work under NAFTA. Honda exported 36,429 units in 2011 for 80% of its total production.

Data are not yet available to determine which companies will lead in exports in 2012 and the percentage of total production that is exported. Overall production is expected to rise by over 20% in 2012 and perhaps even faster in future years judging by the amount auto companies are currently investing in Mexico. Obviously, production levels in 2013 and beyond will be closely tied to demand in the USA and Canada.

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Which company produces the most motor vehicles in Mexico?

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Dec 292012
 

Back in 2006, General Motors (GM) was the clear leader in production with 493,841 units (just over 25% of the national total). Nissan was second with 411,236 units (21%). These were followed by Volkswagen (VW) – 339,183; Ford – 329,993 and Chrysler – 307,344. The newcomers, Toyota and Honda trailed way behind with 33,835 and 24,297 units, respectively.

By 2011 the picture had changed considerably. All the manufacturers suffered major losses in 2009 as a result of the Great Recession, but all have recovered, some better than others. Between 2006 and 2011, Nissan increased total production by 48%. In 2011, Nissan led all producers with 607,087 units for almost 24% of the national total.

Nissan easily surpassed GM which increased 2006 to 2011 by only 10% for a total of 544,202 units. VW increased by an impressive 50% to 510,041 units. Ford nearly kept pace with an increase of 40% to 462,462 units. Chrysler with merged with Fiat matched GM with an increase of only 10% up to 338,772 vehicles. Toyota upped production by a very significant 47% to 49,596 units. Honda did even better, increasing its production by a whopping 87% to 45,390 units.

Final data are not yet available to determine which companies led production in 2012. Overall production was expected to rise by over 20% in 2012 and perhaps even faster in future years judging by the amount auto companies are currently investing in Mexico. Obviously, production levels in 2013 and beyond will be closely tied to demand which is linked to overall economic growth. Judging from the investment amounts announced so far, it appears that Nissan will retain its lead in total production, with VW and Ford perhaps challenging GM for second place.

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Mexican vehicle exports surge back after 2008-2009 recession

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Dec 202012
 

The Great Recession related to US housing and banking failures in 2009 hit the Mexican vehicle industry very hard. Production in Mexico declined by 28% from 2.10 million units 2008 to 1.51 million units in 2009. This dropped Mexico to 10th in the world. However, production shot up 50% in 2010 to 2.26 million and grew to 2.56 million in 2011 (data from Mexican Automotive Industry Assn.) It is expected to hit 3.1million in 2012. This enabled Mexico to move past Spain and France into 8th place.

Virtually all of this growth has been in the export sector. In 2011, almost 84% of all vehicles made in Mexico were exported. In fact, sales of Mexican made new cars in Mexico dropped from 1.1 million in 2007 to 0.76 million in 2009. It only rebounded to 0.82 million in 2011. It is expected to increase 11% in 2012 to 1.0 million, still lower than the 2007 level.

In 2011, almost 84% of all vehicles made in Mexico were exported. This export percentage clearly suggests that these manufacturers are primarily focused on selling their Mexican made vehicles in the USA and Canada.

Production is expected to continue increasing rapidly in the years ahead as evidenced by the following recent news releases:

Source of data:

Mexican Automotive Industry Assn. “Mexico’s Automotive Production & Exports Hits Record High in November (2012)”  (pdf file)

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The geography of cement production in Mexico

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Nov 102012
 

In a recent post we saw how Mexico is one of the world’s leading cement manufacturing countries:

The map shows the location of the 34 cement plants currently operating in Mexico. They include 15 belonging to Cemex, 7 to Holcim Apasco, 4 to Cruz Azul, 3 to Cementos Chihuahua, 3 to Cementos Moctezuma and 2 to Lafarge. A new company, Cementos Fortaleza (part-owned by Carlos Slim, the world’s richest man), is due to open in the state of Hidalgo early next year.

Cement plants in Mexico, 2011

Cement plants in Mexico, 2011. Credit: Tony Burton / Geo-Mexico; all rights reserved. Click to enlarge.

According to the Center for Clean Air Policy’s “Sector-based Approaches Case Study: Mexico”,

“The northern region of the country has traditionally been the largest consumer of cement, accounting for 48% of sales mainly for use in infrastructure construction projects, housing and office complexes, and other construction activities. Central Mexico is also a relatively strong market for domestic producers. However, the primary use differs somewhat in that the main source of demand is from construction of new buildings such as hotels and office complexes. The relatively slower pace of economic growth in southern Mexico accounts for the lower share (17%) of domestic cement sales in the south.”

The paucity of cement plants in southern Mexico is particularly well reflected by the map.

The main raw material for cement is limestone. The distribution of cement plants in Mexico tends to follow the distribution of “limestones and clastic rocks” (rocks made of particles of other rocks) on the map of Mexico’s surface geology.

Mexico's surface geology

Mexico’s surface geology. Click map to enlarge.

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Cement production in Mexico

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Nov 032012
 

In 2011, Mexico produced 35.4 million tons of cement, 3% more than a year earlier. The first cement-making plant was built in Mexico in 1906, a few years after cement was first officially approved for use in the construction sector. Cement demand grew only slowly prior to a spate of public infrastructure projects in the mid 1940s.

Cement production in Mexico, 1999-2011

Cement production in Mexico, 1999-2011. Source: Camara Nacional de Cemento

There are currently six major cement makers in Mexico. About 20% of production is sold in bulk to large construction companies. The remaining 80% of production is sold in 50-kg bags, used either by formal residential construction firms (50% of the total) or in informal (do-it-yourself) projects (32% of all purchases).

Cemex holds a 49% share of the domestic market, followed by Holcim Apasco (21%), Cruz Azul (16%), Cementos Moctezuma (10%). The remaining 4% is split between Cementos Chihuahua and Lafarge Cementos. A seventh company, Cementos Fortaleza (part-owned by Carlos Slim, the world’s richest man), is due to open early next year.

Cemex, based in Monterrey, is one of Mexico’s most important multinational companies. It is the world’s third largest cement producer and distributor, with operations in fifty countries worldwide. In 2004 Cemex received the Wharton Infosys Business Transformation Award for its creative and efficient use of information technology. Before Cemex, who had ever heard of cement mixers, armed with GPS devices, satellite links and computer systems hooked up via satellite links to the parent company’s HQ, cruising cities? The strategy allowed the company to achieve enviable levels of operating efficiency while meeting demanding delivery deadlines even in congested urban areas such as Mexico City.

China leads the world in terms of the volume of cement production, making around 2,000 million metric tons (mmt) a year, followed by India (710 mmt), Iran (72), USA (68), Turkey (64), Brazil (63) and Russia (52). Mexico (35.4) places 15th on the list, behind Japan, South Korea, Egypt and Thailand, but ahead of Germany, Indonesia, France, Canada, the UK and Spain.

On a per person basis, annual cement consumption in Mexico is about 300 kg/person, well below the levels recorded in the USA (1100 kg) and elsewhere. (The extreme cement consumer in recent years has been Dubai, with the staggering figure of 8000 kg/person!) Cement production may be a good indicator of how much construction is taking place, but is not very good news for the environment and climate change, since high quantities of carbon dioxide are released into the atmosphere during the production process. Globally, cement making is responsible for up to 10% of people’s total carbon dioxide emissions each year.

The carbon dioxide comes from three distinct sources:

  • During the conversion of raw materials into clinker
  • From the combustion of fuels needed in the cement kilns
  • Indirectly, from producing the energy required to power production machinery such as grinders and electric motors.

However, according to the Center for Clean Air Policy’s Sector-based Approaches Case Study: Mexico,

“Mexico’s cement industry is among the most modern and efficient in the world today. All the 50-plus kilns operating in the country’s 34 cement plants are dry-process. Mexico’s cement manufacturers are also using energy efficiency enhancing technologies such as preheaters and precalciners in many of their facilities. Moreover, a number of plants make use of some forms of low carbon alternative fuels.”

“Between 1992 and 2003, emissions of CO2 by the cement industry in Mexico increased roughly 25%. This compares with a nearly 108% increase in cement sector emissions from all developing countries during that same time frame and a 34% increase in U.S. cement industry emissions. The relatively slow growth of emissions from Mexico’s cement sector is an indication of the high overall efficiency of the sector.”

A future post will look at the location of cement plants in Mexico.

Mexico’s growing industrial might

 Mexico's geography in the Press, Updates to Geo-Mexico  6 Responses »
Sep 292012
 

Industrial exports from Mexico are growing rapidly and diversifying. Some of this growth is coming at the expense of China and other Asian countries. For example, as Adam Thompson reported in the Financial Times, Siemens of Germany recently moved its facilities for assembling high voltage electrical equipment for power substations from China and India to Querétero, Mexico. By next year, most of the 160 parts for this equipment will also be produced in Mexico. Siemens has eight other factories in Mexico and over 6,000 employees. As a result of investments like this, Mexico now exports more manufactured products than the rest of Latin America combined.

It is well known that the USA imports a great deal of manufactured goods from China including toys, electronics, clothing, shoes, etc. But China’s market share of US imports has declined recently, from 29.3% in 2009 to 26.4% to day. On the other hand, Mexico’s market share has increased from 11.0% in 2005 to 14.2%. According to The Economist, “HSBC reckons that by 2018 Mexico will overtake Canada and China to become America’s main source of imports”.

Mexico’s location next to the giant US consumer market is a big factor (see “US firms are near-shoring jobs from China to Mexico”.

It is much faster and cheaper to ship goods from Mexico to the USA rather than from Asia. For example, it usually takes two to seven days from Mexico versus 20 to 60 days from China. Mexico’s locational advantage is particularly important for trendy time-sensitive goods and bulky items. For example, in 2009 Mexico became the world’s leading exporter of flat-screen TVs, surpassing South Korea and China. Mexico is also the leading supplier of smartphones for the US market. Furthermore, as Itizar Gomez Jimenez reports in “Beyond the Refrigerator Door: Success of the Electric Home Appliance industry in Mexico”, most of the large household appliances sold in the USA come from Mexico, including refrigerators, kitchen ranges, dishwashers, microwave ovens, washers and dryers.

Attractive wage rates in Mexico are also a consideration. A decade ago wages in Mexico were roughly four times those in China, but now they are only about 30% higher and the gap is closing (see, “Rising Chinese labor costs: good news for Mexico”). Less red tape under NAFTA also gives Mexico an advantage (see, “Can Mexico’s industry compete with China?”). Mexico is fully committed to globalization. It has free trade agreements with 44 other countries, twice as many as China and four times as many as Brazil. To date, drug war violence has not been a serious constraint to Mexico’s growing manufactured exports.

logo-made-in-mexicoMexico’s maquiladora export industries used to assemble mostly imported parts into finished products for export to the USA. Now, most of the parts are manufactured in Mexico for such industries as electronics, automobiles, appliances and airplanes. (see: “Mexico’s vibrant autoparts sector” and “The reasons why Mexico is fast becoming a key player in aerospace manufacturing). Mexico is also broadening its export market. In 2000, about 90% of Mexico’s exports went to the USA, but now it is down to 80%. Mexico is even exporting manufactured items to China such as the new Chrysler Fiat-500 micro automobile.

While Mexico manufactures products under the names of many foreign brands, it also has its own brands and OEM (original equipment manufacturer) companies that design and build products that are incorporated into foreign branded products. For example, Mexico’s Mabe designs and builds two-thirds of the gas ranges and refrigerators imported into the USA. Furthermore, most of the appliances sold under the General Electric brand in North and South America are manufactured by Mabe. LANIX, Mexico’s largest domestic electronics company, makes desktops, laptops, netbooks, tablets, LCD and LED TV and monitors and smartphones for a range of brand names.

A careful look around a typical household in the USA would reveal that many, perhaps a majority, of the durable manufactured goods would carry a “Made in Mexico” label, including automobiles, flat panel TVs, smartphones, all types of appliances, garden and small power tools, etc. etc.

Sources:

  • Adam Thomson, “Mexico: China’s unlikely challenger.” The Financial Times, September 19, 2012 (registration required).
  • Itizar Gomez Jimenez, “Beyond the Refrigerator Door: Success of the Electric Home Appliance industry in Mexico” (pdf file). Cover Feature: Domestic Consume.

Related posts (specific industries):

Rapid growth in Mexico’s vehicle manufacturing and assembly sector

 Updates to Geo-Mexico  1 Response »
Sep 202012
 

Mexico is rapidly becoming a world leader in vehicle production, which includes cars, commercial vehicles such as large trucks, pick-ups and SUVs (sports utility vehicles). Back in 1995, Mexico produced fewer than a million vehicles and ranked 12th globally. By 2011 it was making 2.68 million, placing it 8th in the world (see table). During the 16 year period, Mexico surpassed France, Canada, the U.K., Russia, Italy and Spain. China and India moved ahead of Mexico during the period.

Mexico’s impressive 1995 to 2011 growth of 185% was third among top vehicle producers, but trailed way behind the amazing growth of China at 1170% and India at 515%. Others experiencing significant growth include Brazil up 109%, Russia up 101%, South Korea up 84% and Germany up 35%. Except for Spain, which edged up less than 1%, all the other other major vehicle producers experienced significant declines in the number of vehicles produced: USA (- 28%), Japan (-18%), U.K. (-17%), France (-15%) and Canada (-12%). The data clearly indicate that vehicle production is shifting rather quickly from the major producers of past decades to a number of emerging economies with lower labor costs. Germany appears to be the only exception to this shift. In North America, production has shifted from the USA and Canada to Mexico, largely as a result of NAFTA.

2011 Production Statistics (Source: International Organization of Motor Vehicle Manufacturers)

Country Cars Commercial vehicles
 Total Change from 2010
(millions of vehicles)
China 14.5 3.9 18.4 0.8%
USA 3.0 5.7 8.7 11.5%
Japan 7.2 1.2 8.4 –12.8%
Germany 5.9 0.4 6.3 6.9%
South Korea 4.2 0.4 4.7 9.0%
India 3.0 0.9 3.9 10.4%
Brazil 2.5 0.9 3.4 0.7%
MEXICO 1.7 1.0 2.7 14.4%
Spain 1.8 0.5 2.4 –1.4%
France 1.9 0.4 2.3 2.9%
Canada 1.0 1.1 2.1 3.2%
Russia 1.7 0.2 2.0 41.7%
TOTAL 59.9 20.2 80.1 3.1%

 

Mexico vehicle production grew by over 14% from 2010 to 2011, the fastest among all major producers except Russia, which advanced at a very impressive 42% (see table). Available data indicate that Mexico’s rapid growth has continued into 2012. Interestingly, the USA’s growth of 12% over its lackluster 2010 total placed it 3rd, ahead of India (10%), South Korea (9%) and Germany (7%). Surprisingly, Brazil and China grew by less than 1%, though China’s 2011 production level of over 18 million vehicles was over twice as many as its nearest rivals, the USA and Japan.

Just looking at commercial vehicles, which include pick-ups and SUVs, Mexico ranks a very impressive 5th in the world with over a million vehicles, behind only the USA, China, Japan and Canada. On this list, Germany and South Korea drop back to 11th and 12th behind Thailand, India, Brazil, Turkey and Spain.

Source of data:

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Mexico’s vibrant autoparts sector

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Sep 102011
 

In previous posts in this mini-series, we have seen where Mexico’s vehicle assembly plants are located and looked at some of the reasons for Mexico’s success in this industrial sector. In this post, we consider the importance of the autoparts industry.

Each year, Mexico makes about 2 million vehicles, of which about 1.5 million are for export. Vehicle manufacturing is heavily dependent on parts manufacturers and suppliers. Vehicle assembly plants often require parts to be delivered in a “just in time” basis, to reduce the costs associated with warehousing and inventory. Mexico’s autoparts industry has grown rapidly in the last decade, and now accounts for about 7% of all the GDP derived from manufacturing activities, and for more than 8% of all manufactured exports.

The autoparts sector comprises about 1100 companies, one-third of which are Mexican-owned or controlled. Autoparts manufacturers employ more than 400,000 workers nationwide and exports of autoparts to the USA are worth more than $25 billion a year.

Car factories breed tire factories. Bridgestone, the Japanese tire-maker, and Pirelli, its Italian counterpart, are both investing in Mexico this year, expanding their production facilities and supply of tires to the North American market. Bridgestone is spending $100 million to upgrade its plants in Cuernavaca (Morelos) and Monterrey (Nuevo León), allowing production to rise to 10 million tires a year. Bridgestone also operates a retreading facility for truck tires in León, Guanajuato. Meanwhile, Pirelli is building a 210-million-dollar factory in Silao (Guanajuato) which will turn out 3 million high performance tires each year.

Good-Year campaign to recycle tires

Goodyear recycles tires

Related links:

For a useful map of major scrap tire piles either side of the border and a scary count of scrap tires, see Border 2012: U.S.–Mexico Border Scrap Tire Inventory, Summary Report (May 2007) (pdf file)

For some other (fun and extraordinary) ideas as to how old tires can be re-used, see Tires as Art.