Mexico’s vehicle manufacturing market could match China

The USMCA’s trade deals and fewer restrictions mean Mexico could stand tall during the manufacturing migration. By Elle Farrell-Kingsley

With its origins dating back to the early 1900s, Mexico's automotive industry has since made impressive progress towards establishing itself as a globally competitive manufacturer. In 2021, the country's passenger car market recorded revenue of more than US$51.4bn, up by over a quarter of its 2020 revenue, according to Statista.

Automotive World Magazine – October 2022

Despite recent production shortages caused by the COVID-19 pandemic, Mexico was among the largest motor vehicle producers in the world, and the leader across the Latin American region. Many economies have suffered due to the semiconductor crisis, and some have blamed the shrinking supplier base and manufacturing consolidation for the current chip shortage. Approximately 75% the world's semiconductors are manufactured in East Asia. According to TACNA Manufacturing, the problem will only worsen unless companies expand their supplier network size and outsource to other countries such as Mexico.

Mexico already has a strong semiconductor manufacturing industry that turns out nearly 12% of the global supply annually—on par with US production, according to the market researchers Tetakawi. As the fourth largest automotive manufacturer and eighth largest electronics manufacturer in the world, Mexico offers US companies a cost-effective and resilient option for diversifying their manufacturing.

Mexico has been well positioned to win a larger share of manufacturing work

Furthermore, its manufacturing capacity could present a promising future: "Mexico has always been an attractive manufacturing market compared to the US and Europe,” says Misha Govshteyn,  MacroFab's Chief Executive. MacroFab is a digital platform for electronics manufacturing from prototype to high-scale production, with a network of factories across North America. "Contrary to public perception, manufacturing labour rates in Mexico became lower than in China a decade ago and have remained lower into the 2020s as large multinational OEMs and industrial companies have major operations in Mexico for that reason." He cites recent transportation challenges, particularly ocean freight delays, as having made the cost difference even starker when fully landed costs are factored in.

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