mexico automotive industry

Business Opportunities in the Mexican Automotive Industry

For the 3rd consecutive year, Mexico boasts a bigger automotive market than Brazil. Additionally, the country is ripe with investment opportunities. Read on to learn about the biggest car industry in Latin America. 

Business Opportunties – Astonishing Numbers: Mexican Automotive Industry

The rate with which the Mexican automotive industry has grown in the last decade is very impressive. In 2017, over 3.7 million units were produced, representing a remarkable 9% increase in production. Exports to Asia grew by 38% whilst exports to Europe, largely to Germany, grew by over 45%. Furthermore, with new trade deals such as the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) established, it would appear that these statistics will continue improving. Mexico is the 4th largest global exporter of light vehicles and is ranked 6th in the auto-parts industry. The latter provides over 800,000 jobs and rakes in USD$85 million.

This reputation has inspired giants such as Volkswagen, Nissan and General Motors to establish themselves in Mexico and continue to invest in expanding their presence. In 2015, Volkswagen invested USD$1billion to expand their Puebla factory. Equally, General Motors increased their production by 15% in 2017.

The Vast Potential of the Domestic Market

Whilst the production and export figures are exciting, what is also fascinating is the possibility to harness the enormous working market in Mexico, something that has yet to be effectively accomplished. The working population of Mexico is estimated to be around 59 million people. However, Mexico now raises the point that roughly 60%, approx. 35 million Mexicans, are informal workers without the necessary social security and credit ratings to purchase a car. With these two facts in mind, the potential explosion of the domestic market is there for all to see. With the necessary government actions being taken to try and include this huge sector of the population, possibly aided by external support schemes and/or investment, a huge new market could be created.

Mexico has the largest automotive industry in Latin America.

Why Invest in Mexico?

With the market making such incredible strides, and growing year by year, it is necessary to take a step back and think about why Mexico has emerged as such a superpower in the automotive industry. The first reason is the geographical placement of Mexico and its extensive network of airports (76), ports (117) and land infrastructure. Acting as a buffer zone between the largest economy in the world, the United States, and the emerging economies of South America, Mexico is perfectly situated and equipped to distribute its cars and parts. Secondly, production costs in Mexico are significantly lower than in North America or Europe, making it an attractive place for major companies to base themselves. The cost of producing metal parts in Mexico is nearly 17% less than in North America. Finally, the vast outreach of Mexico’s trading agreements means that they have access to 46 different markets via 10 FTAs (Free Trade Agreements). These 3 factors; infrastructure, production costs and trade deals, all combine to create a unique environment in the industry and explain how Mexico became so significant in car manufacturing.

Fancy Finding Out More About the Automotive Industry in Mexico?

To learn more about the Mexican economy, the business opportunities to form a company in Mexico, and how you might take advantage of these political shifts, please reach out to our team at Biz Latin Hub.

For more information on business in Latin America, have a look at this video:

YouTube video
Doing business in Latin America a video by Biz Latin Hub

The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.
Legal Team Mexico

Legal Team Mexico

Legal Team Mexico is the Biz Latin Hub leading experts on doing business in Mexico The Team writes on the news, doing business, law, and changing regulations. The team are experts in corporate law, Administrative law, Employment law, Immigration law and legal advisory services. Read more about them here. You can contact Legal Team Mexico via our "contact us page".

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