The great challenge: attracting and retaining new manufacturing plants in Mexico

The Mexican Association of the Automotive Industry (AMIA) forecasts that approximately four million vehicles will be assembled by 2025. Therefore, new manufacturing plants in Mexico will be needed to reach that number.

Mexico is preparing policies to attract new manufacturing plants to the country that want to take advantage of the country’s physical proximity to the United States (nearshoring). Establishing new manufacturing plants in Mexico will solve the challenges faced by the industry due to bottlenecks and interruptions in logistics distribution chains, mainly from China to North America, due to the coronavirus and the war between Russia and Ukraine. This point was recently made by the Mexican Undersecretary of Economy, Héctor Guerrero Herrera. “Mexico is facing an extraordinary opportunity to seek the relocation of plants in the industrial sectors,” he explained.

At a press conference organized by the financial services company Equity Link, Héctor Guerrero asserted that the negative impact caused by the dependence on Asian markets in the supply chain could be used to attract new manufacturing plants in Mexico and more investments, specifically by assemblers. These companies will find that settling on the border between Mexico and the United States and in the Bajío will be to their advantage.

“It is a great moment for Mexico to take advantage of the current circumstances. We are working on it diligently,” said the Undersecretary of Economy.

He added that Mexico has at present, an excellent opportunity to become a country of even greater importance to the United States. This importance will manifest itself in industries such as automotive, aerospace, medicines, and critical minerals such as lithium and medical devices, where the relocation of new manufacturing plants in Mexico will be crucial.

Examples of companies establishing new manufacturing plants in Mexico include:

• Ambu A/S is a Danish medical device manufacturer currently building a factory just outside of Ciudad Juárez.
• Keeson Technology, a Chinese furniture maker, which is building a second plant on the US-Mexico border.
• Boyd, a California-based conglomerate that recently opened a new factory and has plans to build three more in the country.

In addition to the projects mentioned above, MGA Entertainment, a toy company based in California, started manufacturing Little Tikes Cozy Coupes in October of last year at its plant in Mexico.

Developers of industrial parks point out that the low production costs in communities such as Ciudad Juárez, Tijuana, Reynosa, Matamoros, Piedras Negras, and the Bajio region make the installation of new manufacturing plants in Mexico attractive.

Mexico could produce up to five million cars

In the next three years, the automotive industry will produce approximately four million units. This will represent a 25 percent increase in production over current levels.

“Mexico manufactured approximately three million vehicles last year. We want to raise production to four million units by 2025. Therefore, the installed capacity is approximately five million vehicles,” said José Zozaya, president of the Mexican Association of the Automotive Industry (AMIA).

He added that the automotive industry had suffered the adverse effects of the pandemic and the semiconductor deficit in the last two years. These circumstances have forced companies to close plants, experience delays in the delivery of units, and face increases in the final cost of auto parts.

“These two years hit the automotive sector in Mexico first because of the pandemic and second because of the suspension of activities in the assembly plants that lasted two months. This situation slowed down production and exports. Then, when we began to recover, to open up the markets, and there was a greater demand for cars, we faced the lack of the semiconductors needed to manufacture our products,” he explained.

To this was added the inflationary pressure caused, in part, by the war between Russia and Ukraine. This circumstance affected supplier countries and auto parts companies. In addition to this, blockades of Chinese ports after the mandatory confinements due to coronavirus outbreaks in recent months caused the further dislocation of markets and supply chains.

They will provide five hundred million dollars of factoring

The financial firm Equity Link seeks to capitalize small and large companies of various kinds and has plans to attract investments of more than five hundred million dollars in financial factoring, credit, and leasing services.

Mario Antúnez, general director of Equity Link, explained that the initiative seeks to alleviate the financial burdens of thousands of manufacturing companies that had losses in production due to the health crisis. In addition, equity Link’s financing programs will help offer alternatives for development within the aerospace, automotive, and service industries through its factoring plan.

“We estimate to finance 500 million dollars in new and existing manufacturing plants in Mexico in the next 24 months,” he specified. He went on to add that one of the effort’s main objectives will be to offer capital to develop Mexican industrial manufacturing.