Mexico to Become World’s Fourth-Largest Producer of Auto Parts by 2023

By Alejandro Lara | Board Member at American Industries Group®
Published 02/17/2022
Currently, Mexico is the world’s largest exporter of US automotive parts and the fifth-largest producer of auto parts globally. Production in this industry reached US 94 billion annually in 2021, and experts expect this number to increase to US 102 billion by 2023. This growth would move Mexico’s ranking up to number four, replacing Germany. Many factors have contributed to the steady growth of automotive manufacturing in Mexico in recent decades, and a recent reshoring trend has accelerated even further due to rising shipping costs and the US’s ongoing trade war with China.

A recent factor contributing to the expansion of automotive manufacturing in Mexico is the updated NAFTA agreement, known as the United States-Mexico-Canada Agreement (USMCA), which went into effect in July of 2020. It contains several updated provisions relating to auto parts and auto manufacturers. One of the main ones is an increase in regional value content (RVC) requirements. It establishes an RVC of 75% (up from 62.5% under NAFTA) for automobiles and a similar threshold for core, principal, and complementary parts. In addition, it introduces new origin procedures aimed at reducing the burden on automotive producers.

start up manufacturing in mexico

Reshoring trend to reduce dependency on China

On the other hand, many companies in the automotive and auto parts industries are looking to start up manufacturing in Mexico to reduce dependency on China. The instability produced by an ongoing US-China trade war has intensified with the imposition of 25% tariffs on China. Furthermore, recent astronomical increases in shipping costs, major disruptions to supply chains (especially in Asia), significant delays and cost increases for container shipping, slowdowns in production and business caused by the pandemic, and poor logistics, have also contributed to the reshoring trend.

Mexico is poised to take advantage of this and offers a variety of additional opportunities for international companies looking to expand or relocate. Not only does its privileged location bordering the US allow manufacturers to save over 80% on time and shipping costs compared to China, but it also allows them to minimize inventories and improve logistics processes overall.

Strong regional networks in the automotive industry

Automotive manufacturing Mexico has very well-established production clusters. One of the most notable is the Guanajuato region, where companies looking to start up operations in Mexico will find the greatest concentration of OEMs in the country; four of the world largest automakers have major facilities there: Mazda, Toyota, Honda and GM.

start up operations in mexico

Some of the main products in the auto and auto parts industry include harnesses, wires and cables; die-cut parts and accessories for car bodies; seats and their parts; gearboxes and parts thereof; brake mechanisms; internal combustion engines and lighting and visual signaling devices, among many other parts and processes available.

As companies around the world continue to look for ways to reduce risk, improve logistics, and evolve to meet the demands of this new era, Mexico continues to grow and consolidate regional supply chains, offering a variety of benefits in the automotive industry. Don’t hesitate to contact us if you would like to learn more about how starting up manufacturing services in Mexico can help your business grow.

Alejandro Lara

Board Member

American Industries Group®

Share it!

Follow Us

Latest Posts

November 23, 2022

Aluminum; business for the USMCA market

Over two years after the enactment of the United States-Mexico-Canada Agreement (USMCA), aluminum imports from the US to Mexico have reached record levels. As one of […]
November 10, 2022

Doing Business in Mexico: Labor Considerations and Foreign Investment

One of the main reasons Mexican manufacturing has been so popular, especially for US companies, is its competitive labor rates. This means significant savings, but at […]
November 8, 2022

Benefits of IVA (VAT) / IEPS Certification

Many companies are familiar with Mexico’s IMMEX program for international and US companies manufacturing in Mexico, which has been in place for over 30 years and […]
Did you find this content interesting? Sign up for our monthly newsletter to receive more articles and infographics.

Subscribe



YOU MIGHT ALSO LIKE

June 14, 2021
Manufacturing in Mexico
Nuevo Leon: Leading State in FDI for Manufacturing in Mexico
Despite last years’ global economic downturn, the State of Nuevo Leon remained a leader in Mexico for foreign direct investment, especially for companies manufacturing in Mexico. […]
November 24, 2020
Ciudad Juárez: Heart of Mexico’s Maquila Industry
Ciudad Juárez, located in the state of Chihuahua along Mexico’s northern border, is one of the most important areas in the country for maquiladoras—factories that take […]
July 31, 2020
Chihuahua: A Preferred Option for Nearshore Manufacturing in Mexico
Chihuahua, the capital city of the State of Chihuahua, is a medium-size city with a long history of engaging in manufacturing activities. This has been the […]
February 15, 2021
Shelter services in Mexico
Chihuahua City: A Business Ecosystem that Fosters Expansion
Inside Metal Finishing’s plant, aluminum airplane components are dipped in vats of chemicals, then covered with primer, and painted to protect them from corrosion and reduce […]
June 22, 2020
State of Nuevo Leon: A Leader in Industry and Manufacturing in Mexico
Located in northeastern Mexico, the State of Nuevo León is a driving force in Mexico manufacturing and industry. For over 20 years, it has led the […]
April 19, 2021
Industrial Clusters in Jalisco
Industrial Clusters in Jalisco: Key to Competitiveness
A variety of factors contribute to increasing a region’s competitiveness, including availability and cost of labor, supply chain maturity, industrial ecosystem, and logistics infrastructure. Yet, there […]