Looking For A New Auto Parts Manufacturer? Why Mexico Is A Better Choice Than China

It’s not widely publicized (at least not in the US) that Mexico has grown to be one of the world’s largest manufacturing economies. Mexican manufacturers have long built auto parts and automotive assemblies, but since 1994, Mexican manufacturing has expanded dramatically.

Many components and assemblies for the medical industry, electronics industry, consumer products, aviation, and aerospace industries are now made in Mexico.

Despite Mexico’s manufacturing success and cost the advantages this brings to its customers, many industry executives assume that China is still the best place to source whatever they need. While we might be a bit biased (Intran has a manufacturing facility not far from Mexico City), we think the case for Mexican manufacturing is much better than the case for Chinese manufacturing, particularly for companies in the United States and Canada. Here’s our proof.

Skilled, Low-Cost Labor

The most attractive reasons to work with a manufacturer in Mexico include:

1. A deep pool of trained manufacturing workers
2. Labor costs are competitive with China (In many cases, Mexico’s labor costs are lower.)

As far as skilled labor is concerned, Mexico graduates 115,000 engineers every year. That’s more than the US of A! On a per capita basis, Mexico has more skilled laborers in manufacturing, engineering, and construction than the US or China. (A little about Intran’s workforce in this blog post.)

As for labor costs, Quartz has published data showing that Mexico’s labor costs are 30% lower than Chinese labor costs. Unlike in China, Mexico’s labor rates are steady. As a result, Chinese manufacturing costs have exceeded Mexican manufacturing costs…and this labor cost difference doesn’t account for shipping costs.

Distance Matters

Factory visits and in-person meetings are easy when you’re working with a Mexican manufacturer. China? Not so much.

Distance might not seem important when choosing a manufacturer, but there are benefits to being close to our US and Canadian customers:

1. It’s easy to visit our facility, meet with our team, and work out any issues that crop up when you’re so close.
2. Because of the small time zone difference, it’s easy to have phone calls, meetings, and exchange emails.
3. Trans-Pacific flights cost a great deal of money. Not only are the plane tickets expensive, but staff that visits China often needs 2-3 days to adjust to the new time zone, and 2-3 more days to recover once they return. This adds up to about a week of lost productivity.

With a quick flight to Mexico City and a short drive, a staff member can be on our factory floor in no time back to work the next day (and no worse for the wear).

Faster, Cheaper, And More Flexible Shipping

Once parts or components have been manufactured, shipping them to the US or Canada from Mexico can take as little as a day. The shipment can be sent via truck or via rail, ensuring minimal costs and maximum flexibility. Best of all, shipments can be sent in smaller quantities – as little as one pallet at a time.

Shipping from China is expensive, difficult, and has a high capital cost:

• Chinese manufacturers often require an order large enough to fill a 40-foot container.
• Container shipments can take between 17 days and 6 weeks to arrive in the USA.
• Depending on the payment terms, parts/components from China are often paid for before they’re shipped. This means a big chunk of cash is sitting in a container waiting to be delivered.

Finally, it’s just math: Shorter shipping distances = lower shipping costs.

While an impressive feat of maritime design and engineering, container ships like this one are expensive to own and operate. Shipping costs are high, wait times are long, and shipment terms aren’t very flexible.

Intellectual Property

Mexico’s legal system – and Mexican courts – have a history of honoring intellectual property rights. The same cannot be said of China, unfortunately. IndustryWeek.com reports that Chinese entities are responsible for 50-80% of all US intellectual property theft, working out to hundreds of billions of dollars in lost revenue for US companies.

According to the Global Intellectual Property Center, Mexico rivals Canada in terms of intellectual property protections. China scored 2nd lowest overall in a recent rankings study.

Social Responsibility And Public Relations

US and Canadian consumers are increasingly aware of (and concerned about) the origin of the products they buy. With this awareness, many companies have suffered from negative publicity due to cultural differences between the US or Canada and China:

• Cultural norms regarding workers are much different in China than they are in the US, Canada, and Mexico. In China, long hours and working conditions that most people in North America would consider “sub-standard” are the norm. This can lead to embarrassing publicity for companies that contract Chinese manufacturers.
• Chinese manufacturers have been known to use tainted raw materials, leading to everything from premature part failures to safety recalls.
• Chinese environmental rules and regulations do not match the sensibilities of US and Canadian consumers. This could lead consumers to boycott certain products or companies out of concern for the environment.

While it’s true that Chinese manufacturers are beginning to adapt labor and environmental practices that are palatable to North American consumers, Mexican manufactures are already acceptable. (More on that here.)

Mexico has long mirrored labor and environmental policies in the US and Canada. Mexico has a 48 hour work week, worker safety practices and regulations, and strict rules against child labor. Mexico’s environmental regulations are compatible with US and Canadian expectations as well. (Learn more about China vs Mexico labor laws in this Intran blog post.)

The secret is out! Auto manufacturing in Mexico is growing. Sourcing auto parts from Mexico makes sense. Image via Omaha.com and the Associated Press.

Experience And Reliability

Auto parts have been manufactured in Mexico for decades. Established Mexican auto part manufacturers like Intran have experience producing a wide variety of automotive parts and components, which helps to boost quality and reduce costs.

Established manufacturers are also important. Intran, for example, has been in business for nearly 50 years. Our Mexican company has weathered economic recessions and slowdowns, currency exchange problems, labor shortages, and more. As a result of these experiences, we know what it takes to deliver for our customers no matter what.

Everybody’s Doing It

For all the reasons listed above (and more), Mexico is on track to be one of the world’s largest manufacturing hubs. Hundreds of Fortune 1000 companies have either opened a manufacturing plant in Mexico, partnered with an existing Mexican manufacturer, or have made plans to do these things soon.

Considering all the cost and logistical benefits, it’s no wonder that Mexican manufacturing is booming. If you’re thinking about sourcing parts from China, consider nearshoring instead. Take a closer look at Mexico first.