Three Reasons Why Mexican Auto Parts Manufacturing Will Continue To Grow

We spend a lot of time talking about why contract manufacturing in Mexico is a great and affordable solution. But how long will it remain an ideal nearshoring solution for US and Canadian companies? 

Contract manufacturing in Mexico is growing and will remain the best solution around for a long time. We have three reasons why:

1. Continued Investment In Infrastructure

Several years ago, the Mexican government kicked off a major infrastructure program. This has resulted in spending on railways, electricity generation and distribution, highway development, port upgrades, and so on. Mexico’s current leader Andrés Manuel López Obrador (AMLO) wants to expand investment into education, internet access, and more. If even half of the planned infrastructure investments become a reality, Mexican manufacturers will grow without concern over infrastructure limitations.

For example, shipping will become faster and remain affordable from the following improvements:

• New railways
• Upgraded highways
• Frozen gas prices

The focus on improving countrywide education will benefit the Mexican auto parts manufacturing industry greatly, too. With AMLO’s goal of opening 100 public universities and offering paid apprenticeships, the workforce will be more knowledgable. Even though the skilled labor pool in Mexico already has more manufacturing degrees per capita than in the United States, the workforce is only going to get more innovative and more efficient.

2. Proximity To The United States And Canada

Mexico will continue to be the closest low cost manufacturing location for US and Canadian companies. As wages increase and fuel prices fluctuate around the world, geographic distance will become an increasingly important component of manufacturing costs. US and Canadian companies looking for the best value in manufacturing will find that Mexico’s “closeness” minimizes transportation costs. Nearshoring results in savings that will matter more and more as time goes by, particularly if transportation costs grow along with wages (as they are expected to do).

Not only is Mexico’s proximity to the US and Canada a huge advantage in terms of shipping costs, but it also provides for faster shipping times as there are fewer supply chain interruptions. Also, companies can make smaller orders as opposed to ordering a container load of products. It’s a win-win situation, and US and Canadian companies will continue to take advantage of Mexico’s close proximity.

3. Support From Mexico’s Government

Image Credit: Jacky Muniello/Bloomberg

As a part of the infrastructure program mentioned above, Mexico’s government continues to focus on growing manufacturing. Mexico’s political leaders understand that manufacturing is one of the keys to economic growth, and they support it with smart policies. For example, the IMMEX program allows manufacturers in Mexico to import raw materials duty free, provided they are exported within a specific time frame. This effort to minimize finished product costs is one of many measures the Mexican government has implemented to facilitate manufacturing growth.

If your company is considering offshoring (or nearshoring as some like to call it) manufacturing to a contract manufacturer, a Mexican company like Intran should be at the top of your list. Not only do we have considerable experience as a manufacturer, we’re also located in one of the most manufacturing-friendly countries in the world. Learn more about Intran here!