Pedal to the metal

Mexico’s automotive industry has undergone a transformative surge in recent decades, emerging as a formidable player in the global market. Blessed with a strategic geographical location and a skilled workforce, Mexico has attracted substantial foreign investments, notably from China, which have bolstered its automotive sector.  

China, with its manufacturing and technology expertise, has established a substantial presence within Mexico’s automotive landscape. Chinese automakers have not only made significant investments in manufacturing facilities but have also initiated joint ventures with Mexican companies, fostering knowledge transfer and skill development. 

For example, Jetour, a Chinese automaker, recently announced a USD 3 billion automotive plant in Mexico which while the Chinese state-owned Chirey is negotiating the location to build a new production plant in Mexico. Foton, also a Beijing-based vehicle manufacturer, is planning to build a second plant in Mexico to assemble electric trucks for haulage and construction materials. 

The influx of Chinese investment has invigorated Mexico’s automotive supply chain, catalysing the growth of ancillary industries and creating job opportunities. Additionally, Chinese automakers have been keen on leveraging Mexico’s trade agreements, such as the United States-Mexico-Canada Agreement (“USMCA”), to access the North American market more efficiently. This strategic positioning has enabled Mexico to become an integral part of China’s global supply chain, serving as a gateway for Chinese automotive exports to North America. 

“today [Chinese] know that the only way to increase their presence in the domestic market is to set up assembly plants in Mexico just as other foreign automotive companies have done and plan to do.”

NED of several large automotive groups, Mexico

It wasn’t always like this, explained an experienced non-executive direct of several large automotive groups in Mexico, “The Chinese were reluctant to invest in Mexico for many years because they only wanted to export their vehicles into the Mexican market, today they know that the only way to increase their presence in the domestic market is to set up assembly plants in Mexico just as other foreign automotive companies have done and plan to do. The Chinese took note and although they have not made it official, so far, their teams are looking for locations for new assembly plants. The US won’t be happy about it, but I think sense will prevail because Washington will know that they will also benefit from a flow of investment and supply in their own companies.” 

Foreign automotive manufacturers have been competing in Mexico for decades recalled the retired automotive association executive who believed Chinese interest was just the latest chapter, “Competitors from outside North America arrived as early as the 60’s, when Japanese and German brands set up assembly plants, in a sign that the Detroit brands would not have the whole cake and their success in the market would depend on their quality and services. The arrival of Korean and Chinese brands in Mexico is just another wave of competition, there is no need to panic it is just time to evolve and adapt.” 

“The arrival of Korean and Chinese brands in Mexico is just another wave of competition, there is no need to panic it is just time to evolve and adapt.”

A retired automotive association executive, Mexico

Despite these reassurances, many industry stakeholders see Chinese interest as a challenge. The general view is that as Mexico seeks to nurture its domestic automotive industry, it must carefully manage the influx of Chinese investments to safeguard its economic sovereignty and prevent overreliance on foreign entities. Striking a balance between foreign capital and local development is crucial to ensure Mexico’s long-term competitiveness and technological independence. 

A retired executive of Mexico’s automotive industry trade association perceived many other difficulties, “From my perspective, the main challenges facing Mexico’s automotive industry are domestic problems: political instability, old or inoperative infrastructure such as ports, roads and industrial parks; poor energy security; exposure to organised crime and in some places water security. If Mexico cannot resolve these issues, it could miss out on an historic opportunity.” 

Mexico’s automotive industry has experienced remarkable growth over many decades with the support of foreign investment. These partnerships have propelled Mexico onto the global stage, bolstering its manufacturing capabilities and positioning it as a key player in the automotive sector. By leveraging the strengths of both nations, Mexico and China have created a mutually beneficial synergy that has the potential to reshape the global automotive landscape. 

 

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