Did you know that automotive manufacturing in Mexico is one of the country’s most important and fastest-growing industries? As the largest supplier of auto parts to the United States, it has solidified its position in the global market and will continue to expand as manufacturers around the world are looking for ways to decrease dependence on China and due to new regulations implemented under the recently signed United States-Mexico-Canada Agreement (USMCA). With it’s skilled, affordable and abundant labor force, mature industry and numerous trade agreements, it offers a stable, attractive, and long-term option for companies looking to start up manufacturing services in Mexico.
Here are some relevant statistics from 2019 on the automotive industry Mexico:
The industry is such a key part of trade in North America that several provisions were included in the USMCA aimed at ensuring long-term stability for automakers. This includes allowing auto parts to move freely between the three countries, and grants assurance that no new tariffs will be placed on vehicles imported from Mexico (or Canada). It will also encourage more smooth and integral supply chains across North America in the automotive industry. Missouri Governor Matt Blunt, president of the American Automotive Policy Council, said he estimates that the USMCA will incentivize a $23 billion increase in U.S. annual parts sales alone.
Given this great interdependence between the three countries, in addition to an increase in the regional value content rule mandated under the USMCA, there have been disruptions in supply chains as the result of shutdowns on both sides of the border from the global coronavirus pandemic. Though several plants in the United States have reopened, they have not been able to operate at full capacity without key parts produced in Mexico. Automotive manufacturing Mexico, and the nearly 900,000 people employed in this sector across the country, are gradually resuming activities upon approval from health authorities starting May 18 under strict safety and health protocols.
There are several auto parts made in Mexico which are needed in order for assembly plants in the USA to operate. “Mexico is an important part supplier for the Armed Forces in the United States, as the [wiring] harnesses used on vehicles produces by the army are purchased from Mexican suppliers,” said Eduardo Solís, global trade consultant and advisor for the Confederation of Industrial Chambers of Mexico.
These challenging and unprecedented times have revealed a clear need to continue developing local supply chains that will allow international companies in Mexico and across the world to reduce dependence on China and be more resilient and flexible. This is especially true for the automotive industry, making now the perfect time to find out about the advantages of starting up manufacturing services in Mexico.