Mexico's strong growth in vehicle production is requiring suppliers to invest in their own manufacturing facilities in the country. AMS takes a look at some of the key developments over the past few yearsAs vehicle-makers in North America change their manufacturing footprints in the region, their suppliers are adapting accordingly. However, companies moving into Mexico do so for a variety of reasons beyond simply being encouraged to by their clients. Lower wages, improving logistics both within the country and into the US, plus Mexico’s free-trade agreements with various jurisdictions around the world are all contributing to the expansion of the Mexican supply base; this includes a number of domestic suppliers which are increasingly being recognised for their quality and competitiveness.
Investments in Mexico come from across the world. For example, Germany’s ThyssenKrupp announced its sixth Mexican plant in Q4 2015, for the production of cylinder covers with integrated camshafts. This involves an investment of €45m ($50.6m), but ThyssenKrupp has earmarked a further €250m for more expansion in the country. As noted below, numerous other suppliers, especially from Japan (Advics, Hakkai, Sekisui and Topy), plus several Korean companies, such as Hanwha, have also announced new or increased investment in Mexico. Hanwha has opened a bumper production facility to support the new Kia plant at Pesquería in Nuevo León (another new supplier factory here is TI Automotive’s ninth facility in the country, which will make brake-line assemblies; clutch lines with flared tubes; water, oil and vacuum tubes; transmission lines; and exhaust-gas reduction pipes).
Several companies established themselves in Mexico many years ago, before the recent burst of investment by international suppliers. For instance, Jatco, the Japanese supplier of automatic gearboxes and continuously variable transmissions (CVTs), opened its Mexican plant at Aguascalientes in 2005, before it launched facilities in China in 2009 and Thailand in 2013.
Further change is likely in Mexico’s supply base, and not only as a straightforward response to each new vehicle plant being added. For instance, BMW and Mercedes-Benz are understood to be working together to develop their supply networks in Mexico in line with their plans to start local vehicle production in the near future. The two German companies intend to build on existing collaboration which has taken place in their homeland for many years. Few details have been released so far, but a new wave of investments from German suppliers to both of these OEMs can be expected.