Overproduction, saturation of Asian brands, and decreases in sales and profits has hit the worldwide automobile industry hard. This situation has also impacted the Mexican automobile industry, as illustrated by the fact that some of the leading car-assembling companies such as Ford, GM, Chrysler, Renault and Volkswagen, have moved their plants and design centers to other countries.

      Mexico’s prominent competitive advantages, which include the geographic proximity to the world’s biggest market, as well as experience in the sector, has attracted many automotive companies in the past which sought to increase production and lower costs.

      The automotive industry is growing in Mexico. Meanwhile, the export market in 2007 presents a total growth of 5.2 percent compared to 2006, with a total production volume of 1,196, 996 vehicles. Total production of Ford Mexico in 2006 tripled, as compared to 2005.

Ford produced 330,182 vehicles in the assembling plants of Cuautitlán, Estado de México and Hermosillo, Sonora.

      This activity provides an extraordinary opportunity for additional growth for U.S. first and second tier suppliers, and especially for providers of raw materials, technological advancement, parts, machinery, and consumable supplies. Automotive assembly plants are now requiring their basic suppliers to be within a 30-minute drive to the manufacturing facility in an effort to reduce inventory costs, increase supply controls, and successfully implement JIT practices.

      The Monterrey, Saltillo, Aguascalientes, Guadalajara and Silao metropolitan regions have become major automotive parts manufacturing hubs. Component manufacturers located in the area supply major automotive assembly plants nationwide.

Monterrey

      Greater Monterrey, home to 4 million people, is considered Mexico’s industrial powerhouse. More than 100 auto parts manufacturers are active in the region. Additionally, there are hundreds of other types of suppliers providing assembly processes for component manufacturers that aren’t necessarily considered direct suppliers to the auto industry. Monterrey’s homegrown successes include NEMAK, a major producer of aluminum heads and blocks, and METALSA, Latin America’s largest manufacturer of small truck and car chassis. Other prominent firms in Monterrey include IMSA Enertec (car battery manufacturer), Carplastic-Visteon (plastic injection parts), and Delphi (automotive electronics for GM and other brands). Finally, Navistar buses, Freightliner trucks, and Volvo and Mercedes class 8 trucks are assembled in Monterrey.

Saltillo

      The capital of Coahuila, Saltillo is located an hour west of Monterrey. This city of 1.2 million is home to two of the largest auto manufacturing and assembly plants in Latin America. GM has three divisions in Saltillo, engaged in motor and transmission assembly, body part stamping, and car assembly. Daimler Chrysler also has two plants in Saltillo, both in the midst of a major expansion due to the company’s decision to close its Mexico City operation. One of Daimler Chrysler plants assembles Dodge Rams. The second focuses on engine assembly. These plants are served by a large number of Mexican, U.S., European and Japanese companies. And new suppliers are regularly being attracted to Saltillo, encouraged by a series of expansion announcements including Toyota’s $800 million assembly plant in nearby San Antonio.

Silao

      The region of Guanajuato has made great strides in the automotive and automotive parts industry with the installation of important plants such as the light truck assembly plant of General Motors, situated in the outskirts of Silao, a small city located one and a half hours south of Aguascalientes. The state government is interested in promoting the development of an automotive parts supply cluster in the area. Silao is a small city, but located close to a large industrial center that includes León, Salamanca, and Irapuato. In this sector, opportunities can be found for manufacturers of leather seats, electric and electronic components, air conditioners, oil and fuel filters, suspensions, paint, tires, batteries, wheels and rims, springs, shock absorbers, engine parts, gears, alternators, starters, brake systems, etc. Some 85 percent of Mexico’s automotive plants are within a 400-mile radius of Guanajuato, thereby offering a strategic position for the development of OEM suppliers. GM requires that the majority of the 1st and 2nd tier suppliers be located within a 30-minute drive from the plant.

Aguascalientes

      A small state with less than a million inhabitants, the GDP of Aguascalientes has been growing by 10 percent almost every year since the early ‘90s. With an established 10-year record, the Aguascalientes automotive cluster represents one of the major industrial markets in Mexico. Automotive-related industry, services and trade contribute to 85 percent of the state’s gross domestic product. Most industry is located in the Aguascalientes-Rincón de Ramos corridor, in two industrial parks in the capital and two parks outside of it. More than 30 companies make up this important cluster. A large Nissan assembly plant is located in Aguascalientes and the majority of the 1st and 2nd tier suppliers to that plant are located nearby. Opportunities in this sector can be found for U.S. suppliers of precision metalworking, plastics, electronic components, tool and die, molds, specialized packaging, automation and sensors, and laboratory equipment for quality assurance.

Jalisco

      Jalisco’s industrial automotive sector is improving efficiency and developing valuable proposals for companies, with less dependence on the electronic industry. The plan relies on sharing a supplier base so that car-assembling plants have access to what they need on a timelier basis.

      There are more than 60 automotive and auto parts companies operating in Jalisco. Some of them include: Honda, Siemens, Takata de México, Sachs Boge Mexico, Waldale, Sunningdale, Teikuro, among others. The main products currently manufactured include: auto parts, airbags, airbag controllers, brake pads, leaf springs, electromechanical parts, mufflers, radiators, rotors, chassis, fuel tanks and rubber frames.

      U.S. companies looking to penetrate Jalisco’s automotive sector would have strong potential in the following areas: castings, brakes, suspension and exhaust systems, clutches, doors and windows, rotors and distributors, among others.

Growth prospects

      The construction of a new car-assembly plant with Mexican capital has commenced in Michoacán. This new project in the western part of Mexico will require diverse suppliers from the automotive industry.

      Grupo Salinas Motors recently broke ground on a new car-assembly plant in Michoacán. The plant will produce high-tech automobiles in Mexico and will provide 4,000 direct jobs and around 15,000 indirect ones. The jobs will be created in the plant as well as sales and service centers.

      This investment project will have a multiplying effect on the economy. Construction will continue until 2010. However, the first cars will be manufactured in 2008. The factory will primarily supply the Mexican market, and later the Central and South American markets.

      Approximate investment for building and equipping the plant will be roughly $150 million and it will have the capacity to assemble 100,000 vehicles annually. The average price of automobiles produced in this plant will be lower than national averages.

      The automotive sector is not only growing in Michoacán. Giant Motors Latin America (GML), a truck-assembling company, has recently established operations in Cancún, as part of its 2008 expansion plan in Mexico. Giant Motors will be the only national assembling plant of cab over trucks, and it expects to have a substantial growth with the opening of other branches in important cities such as Tampico, Aguascalientes and Mexico City.

      With the establishment of Giant Motors in Cancún, and the car-assembling plant in Michoacán, the Mexican automotive market is expected to increase the demand for cutting-edge technology, as well as lubricants, tires, raw materials, new technologies and even outsourcing services that will be required for such ambitious projects.

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