Mexico – The New Destination for Car Factories

September 3, 2013

While the former capital of U.S. automotive manufacturing now crawls in municipal bankruptcy in Detroit, Michigan, a new boom is happening south of the border, and a large number of car manufacturers are embracing the change. Mexican factories are now reaching record levels of production at a lower cost, less issues with union labor strife, and attracting new levels of investment for Mexico.

General Motors, for example, already assigns the manufacturing of its Silverado truck line to an assembly factory in Guanajuato, Mexico. Cadillac is manufacturing higher end SUV units in Monterrey, Mexico. Chrysler has two of its own plants down south, and Audi has committed over $1 billion to set up an assembly plant just outside the city of Puebla. Others, like BMW, are considering the move as well.

In addition to automotive manufacturing, Mexico is also beginning to attract ventures in other industries. Because of the unique combination of low wages, high-end assembly and 44 different trade agreements with other countries, Mexico has managed to attract manufacturers from the Aerospace, Medical Device, Electronics and Alternative Energy sectors, as well.
The German automaker, BMW, has never been one to jump on the newest approach just because the competition was doing it. Instead, with typical German calculation and engineering, the company has regularly made calculated moves with plenty of thought and planning behind them. So having watched what has happened with the competition as well as other carmakers in lower-level vehicle brackets, BMW is finally considering its own foray into Mexico for assembly and manufacturing.

The discussion of a Mexican assembly factory for BMW is in extremely early stages, and the current situation is by no means a definitive sign that the German manufacturer will actually break ground in the Latin American country. Other hurdles need to first be addressed, such as easier trade agreements between the U.S. and Germany’s Europe.

BMW manufacturing in Mexico may not happen in the next few years, but when it does, the company will move fast. Mexico is already very attractive, as noted above, and a number of other carmakers, as well as other sectors, have already figured out how to make the trade agreements in place work for them. If the trend continues, the last of American manufacturing on a big scale might finally meet its last chapter. If that does occur, Mexico will likely flourish, realizing a factory boom potentially similar to what hit the U.S. in the 1950s after World War II.