The Mexican automotive industry is bigger than Brazil. Additionally, the country is ripe with investment opportunities. Read on to learn about the biggest car industry in Latin America. If you are interested in company formation in Mexico, this could be a good place to start.
In general, the country is experiencing strong and sustained growth, and the Mexican automotive industry is no exception to this. A pivot by many countries towards nearshoring is a real boon for the Americas in general and Mexico specifically. It remains cost-competitive with other parts of North America, yet shares time zoens and business culture.
Biz Latin Hub is here to help you enter this fascinating and dynamic market, whether through the Mexican automotive industry or another sector. We know all about getting business done in Latin America and the Caribbean, with a network of 18 dedicated local offices around the region working tirelessly to support our clients.
Business Opportunities – Astonishing Numbers: Mexican Automotive Industry
The rate with which the Mexican automotive industry has grown in the last decade is very impressive. In 2017, over 3.7 million units were produced, representing a remarkable 9% increase in production. Exports to Asia grew by 38% whilst exports to Europe, largely to Germany, grew by over 45%.
Furthermore, with new trade deals such as the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) established, it would appear that these statistics will continue improving. Mexico is the 4th largest global exporter of light vehicles and is ranked 6th in the auto-parts industry. The latter provides over 800,000 jobs and rakes in USD$85 million.
This reputation has inspired giants such as Volkswagen, Nissan and General Motors to establish themselves in Mexico and continue to invest in expanding their presence. In 2015, Volkswagen invested USD$1billion to expand their Puebla factory. Equally, General Motors increased their production by 15% in 2017.
The Vast Potential of the Domestic Market
Whilst the production and export figures are exciting, what is also fascinating is the possibility to harness the enormous working market in Mexico, something that has yet to be effectively accomplished. The working population of Mexico is estimated to be around 59 million people. However, roughly 60%, approx. 35 million Mexicans, are informal workers without the necessary social security and credit ratings to purchase a car.
With these two facts in mind, the potential explosion of the domestic market is there for all to see. With the necessary government actions being taken to try and include this huge sector of the population, possibly aided by external support schemes and/or investment, a huge new market could be created.
Why invest in Mexico?
With the market making such incredible strides, and growing year by year, it is necessary to take a step back and think about why Mexico has emerged as such a superpower in the automotive industry. The first reason is the geographical placement of Mexico and its extensive network of airports (76), ports (117) and land infrastructure.
Acting as a buffer zone between the largest economy in the world, the United States, and the emerging economies of South America, Mexico is perfectly situated and equipped to distribute its cars and parts. Secondly, production costs in Mexico are significantly lower than in North America or Europe, making it an attractive place for major companies to base themselves.
The cost of producing metal parts in Mexico is nearly 17% less than in North America. Finally, the vast outreach of Mexico’s trading agreements means that they have access to 46 different markets via 10 FTAs (Free Trade Agreements). These 3 factors; infrastructure, production costs and trade deals, all combine to create a unique environment in the industry and explain how Mexico became so significant in car manufacturing.
Biz Latin Hub can help you with the Mexican automotive industry
To learn more about the Mexican economy, the business opportunities to form a company in Mexico, and how you might take advantage of these political shifts, please reach out to our team at Biz Latin Hub.
For more information on business in Latin America, have a look at this video:
