Updated on August 27, 2024 

Thinking about nearshoring your manufacturing operations to Mexico? Here’s a look at the advantages and challenges every manufacturer must understand before they plan the big move.

Which industries and businesses are moving their operations to Mexico?

Manufacturers across all industries benefit from the advantages of doing business in Mexico. However, Mexico is home to a handful of industries in particular that have found significant success by moving their production, assembly, fabrication, and other manufacturing operations to this thriving country.

The aerospace, automotive, medical device, electronics, and home appliance industries continue to attract foreign manufacturers from across the globe, thanks to their strong vertical supply chains, which help manufacturers cut down on costs and risks. What’s more, the country now graduates more engineers than the United States each year, all while offering low labor costs and overall cost-effective operations. Today, some of the biggest manufacturers within each industry have set up operations in Mexico, including Toyota, Johnson & Johnson, General Motors, Whirlpool, and Honeywell.

Why are so many companies moving to Mexico?

Mexico is well known for its strategic location and affordable labor costs. But there are many other reasons why big global enterprises have chosen to manufacture in Mexico, including:

• Free Trade Agreements: The Mexican government offers more free trade agreements than any other country in the world, giving manufacturers significant opportunities to expand into global markets and cut down on the costs of imports and exports to the United States and elsewhere in North America while producing high-quality products.
• The IMMEX Program: To further reduce costs and boost efficiency, many manufacturers choose to operate under the IMMEX program, which allows them to temporarily import raw materials and goods duty-free—as long as they are exported from the country within a designated time frame. This can provide significant cost savings to companies.

• A Growing Economy: Mexico’s manufacturing industry is expanding rapidly, but the nation is still considered a developing economy. This means businesses have opportunities to corner their place in the market and build a solid foundation for growth as the economy continues to develop in the coming years.

How should companies address the challenges of manufacturing in Mexico?

Setting up business in any foreign country can come with its own set of challenges. Mexico, however, has unique resources that can help you address whatever challenges you may face.

Challenge #1

After deciding to make the move, one of the first challenges manufacturers experience is forming an effective strategy for entering the market. Mexico offers many different modes of entry, and in order to ensure long-term success, you will need to choose the one that’s right for your business.

Solution: Most manufacturers opt for working with a shelter company to get up and running quickly and successfully. By engaging a shelter service provider like NAPS, foreign companies don’t need to establish their own Mexican entity and instead, they can hand off administrative duties and any liability. Plus, they maintain complete control over their production processes.

Challenge #2

Mexico’s workforce is diverse, highly skilled, and affordable, but foreign investment companies don’t always have sufficient local knowledge to target the right labor pool and find the best employees to fit their business needs. Other administrative duties also become more difficult without an understanding of the local language and culture.

Solution: While the benefits of manufacturing in Mexico are clear, local knowledge is the key to overcoming any challenge you may face while moving your operations. With our expertise in Mexico manufacturing, we take over everything from recruitment and training to talent management and payroll, and you’re able to stay focused on production, quality control, and company direction.

Challenge #3

Moving your operations to Mexico means handling an entirely new legal system. Not only are the tax and labor laws notoriously complicated and hard to navigate, but without full compliance, you also cannot take advantage of the IMMEX program and Mexico’s FTAs.

Solution: Whether you’re looking to expand or are just getting started in your search process, NAPS’ administration and compliance management program ensures you stay compliant with all regulations and are able to make the most of everything Mexico has to offer.

What’s next?

We’ve helped more than 150 companies find long-term success, and we’re confident we can do the same for yours. With our service-oriented operating model, we can help you through all phases of ramping up and managing your manufacturing operations—so you can focus on guiding and growing your business. Contact NAPS and find out why it is the best choice when it comes to moving your manufacturing to Mexico.