Driving Forward: Key Trends, Supply Chain Strategies, and Growth Opportunities for the Automotive Industry in Mexico

By Paulina González | Monterrey Regional Director at American Industries Group®
Published 01/18/2024

Explore the latest in the automotive world, where we look at the global trends shaping the industry, the advantages of the USMCA region, and how Mexico is becoming a key hub for car makers.

In today's dynamic and competitive automotive landscape, automakers face various challenges and opportunities that inform their strategic decisions. As global market trends are constantly being shaped by technological advancements, geopolitical events, supply chain shifts, and evolving regulatory environments, the decision of expanding or relocating operations and selecting the right location becomes more pivotal. This article gives an overview of the global panorama of automotive trends and discusses the benefits of the USMCA region for automakers, emphasizing the strategic advantages it presents.

In addition, we’ll give an overview of Mexico’s automotive landscape and explore how its supply chain expertise, competitive edge, and logistics proficiency position it as a fast-growing hub for automotive innovation. We will also share Mexico’s key performance indicators for 2023 and discuss why partnering with American Industries will guarantee the ideal conditions for your automotive company’s success.

Global and USMCA Region Automotive Overview

As we progress into 2024, the global automotive industry, influenced by evolving market dynamics and technological advancements, is navigating a landscape of recovery and innovation. S&P Global Mobility's projections indicate that worldwide automotive production in 2023 reached 85.6 million light vehicles, marking a 5.0% increase from 2022. This growth is attributed to the rebound in global demand and improvements in semiconductor availability, signaling a gradual return to pre-pandemic production levels.

China, the United States, and Japan emerged as the leading producers of light vehicles in 2023, with production figures of 28.1 million, 13.1 million, and 9.4 million units respectively. Notably, Mexico's production of light vehicles ascended to 3.7 million units, witnessing a 10.5% increase compared to 2022, showcasing the country's resilience and strategic position in the global automotive market.

Despite the industry's recovery, global light vehicle production still lags behind the recent historical highs due to the COVID-19 pandemic and semiconductor shortages. However, the industry's outlook remains optimistic, with anticipated growth driven by the rising demand for electric and autonomous vehicles. These segments are reshaping the automotive landscape, with major manufacturers like General Motors, Toyota, and Volkswagen intensifying their focus on electric vehicles (EVs). Governments worldwide are facilitating this transition, including Canada's mandate for fully electric vehicles by 2035.

In the USMCA region, a notable trend is the shift towards lighter materials in vehicle manufacturing, aiming to enhance fuel efficiency and reduce carbon footprints. The integration of high-strength steel, aluminum, and composite materials is becoming increasingly prevalent.

The market faces pressures to expedite automotive development cycles, with digital twin technology and centralized zonal architectures emerging as key enablers. These innovations streamline the design and manufacturing processes, enhancing efficiency and adaptability.

In summary, the global automotive industry in 2024 is pivoting towards a future defined by electrification, autonomous driving, and sustainability. With the USMCA region playing a significant role in these developments, the industry is set to embrace new opportunities and challenges, propelled by advanced materials and cutting-edge technologies.

Mexico's Automotive Landscape: Production and Trade Powerhouse

In the global automotive scene, Mexico stands out as a major player. By 2023, it has become the world’s seventh-largest maker of passenger vehicles. Here's a closer look at Mexico's role in the automotive industry:

  • High Production & Export Rates: Mexico produced 3.7 million vehicles in 2023, exporting 88% of these. A large portion, 76%, goes to the United States, showing the strong trade ties within North America.
  • Home to Major Automakers: Big names like Audi, BMW, Ford, General Motors, Honda, Hyundai, and Tesla have significant operations in Mexico. Tesla's new plant in Nuevo Leon is the latest addition.
  • Leader in Heavy-Duty Vehicle Manufacturing: Beyond cars, Mexico is a top producer of heavy-duty vehicles for cargo, with companies like Cummins and Detroit Diesel Allison.
  • Economic Contributor & Job Creator: The automotive sector adds 3.6% to Mexico’s GDP and employs over a million people.
  • Boost from USMCA: The USMCA agreement, requiring 75% of a vehicle’s content to be made in North America, has enhanced Mexico's role in automotive production. This change is creating more opportunities for local manufacturers and suppliers.

Mexico's dynamic automotive sector, marked by solid production, manufacturer networks, and strategic trade relationships, especially under USMCA, makes it a key hub in the global automotive industry.

Mexico's Supply Chain Advantages & Key Performance Indicators

Mexico's automotive supply chain, recognized for its strategic importance in the global market, has been significantly bolstered by the USMCA agreement. The country's available and cost-competitive labor force, numerous free trade agreements, and tax savings programs, like IMMEX and soft landing culture, among other advantages, position it as an essential hub for automotive manufacturing. The benefits of Mexico's supply chain lie in its efficient logistics networks and port infrastructure, ample and skilled labor force, numerous Tier 1 automotive suppliers, innovative logistics solutions, and the proximity of auto parts producers to major OEM plants.

Recent statistics tracking Mexico’s key performance indicators as of the end of the third quarter of 2023 reflect this growth and the increasing number of companies deciding to expand or relocate to the country, such as its:

  1. FDI Growth: As of October 2023, Mexico witnessed a Foreign Direct Investment (FDI) total of $33 billion, a 102% increase compared to 2022.
  2. Labor Availability: Mexico boasts a workforce of 5 million.
  3. Competitive Labor Costs: The cost-effectiveness of labor in Mexico adds to its appeal as a prime location for automotive manufacturing.
  4. IMMEX Expansion: The latest statistics report that over 3 million individuals are employed by companies operating under IMMEX, with over 87,000 new IMMEX employees as of October 2023.
  5. Real Estate Development: The real estate market in Mexico spans over 1.2 billion square feet, with an availability of over 20 million square feet. Additionally, over 57 million square feet are under construction, indicating a rapidly expanding infrastructure.
  6. Economic Dynamism: The most dynamic sectors in Mexico include automotive, e-mobility, electronics, and medical devices. These sectors drive Mexico's industrial growth and contribute to its prominence in the global market.

Mexico's combination of strong supply chain capabilities, impressive growth, and strategic positioning make it an attractive destination for automotive manufacturers and suppliers, further solidifying its role as a significant player in the international automotive and manufacturing industries.

Maximizing Success in Mexico’s Automotive Industry with American Industries’ Group

Partnering with American Industries Group ensures that companies can capitalize on these advantages, guaranteeing ideal conditions for success in the automotive sector. Some of the main ways that American Industries reduces or eliminates the learning curve include:

  • Speed and Compliance: We ensure legal certainty and agility in establishing operations, offering assistance with programs, permits, certifications, and legal compliance.
  • Operational Support: We provide comprehensive back-office support, including HR, accounting, customs, logistics, EHS, and payroll.
  • Industrial Buildings & Infrastructure: American Industries offers industrial real estate solutions for manufacturing and logistics, supported by robust infrastructure in electrical, communications, and transportation.
  • Talent Access and Labor Stability: We grant you access to talent and ensure a stable labor environment, which is essential for your automotive company’s growth.

Our expertise, and strong regional presence in Mexico allow us to provide tailored solutions for investors. With nearly 50 years of experience, we have supported over 250 companies, creating over 75,000 formal jobs. Our strong relationships with government, educational institutions, and industry associations ensure seamless integration into Mexico’s automotive sector.

For automotive sector decision-makers considering expansion, relocation, or establishing new partnerships in Mexico, American Industries is the ideal partner to navigate the landscape. Check one of our client’s testimonials here! We invite you to contact us for a free business case analysis to get an idea of what an expansion into Mexico entails. Reach out today to explore the opportunities that await in Mexico’s thriving automotive industry.

Paulina González

Monterrey Regional Director

American Industries Group®

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