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.
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.
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?
If you have considered Mexico as an investment destination, but have lacked local ‘on-ground knowledge’, you may need to work with a local partner. Biz Latin Hub has ample experience in assisting foreign companies to incorporate a company in Mexico and commence commercial operations in this attractive region. Reach out to Alex, Country Manager of Biz Latin Hub Mexico with any questions at [email protected].
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