The global economy is constantly changing; it’s no longer as affordable to manufacture in China as it once was. As a result, major automotive companies such as Honda are searching for another location where it will be cheaper for them to build vehicles. Curious to know where this place is?
It is actually Mexico. A large number of cars that are being sold at dealerships in America are actually made in Mexico. Back in the 90′s cars sold like hotcakes and companies were trying to keep up with the demand. Soon car companies based in Europe like Porsche, Peugeot and Mercedes-Benz and Asia like Honda built plants in Mexico to booster their presence in North America and especially the United States.
A few years ago the economy took a big hit and all the major companies were looking for a way to decrease their costs. Where could they build cars for the least amount of money? China was a good choice back then. Before you know it all the big automotive companies had a factory in China just to build autos.
It looks like the tide has changed again. It is a lot costlier today to build a car in China than it was a few years ago. There are also unresolved issues about logistical difficulties and protection of intellectual property. All of these issues have made auto makers who are involved in China to again look for a cheaper location with less baggage where they can build their cars. That location is Mexico.
It should be rather clear as to why Mexico is such a great location for automotive companies. For one thing, it’s just a short drive away from the United States. In addition, production of vehicles in Mexico jumped to 2.3 million units in 2010 which is a new record. Mexico is actually number nine when it comes to countries that are building the most cars. According to a 2009 Alix Partners Report, Mexico is considered an easier place for automotive vehicles to build cars than India or China. This is due to the fact that Mexico’s exchange rate is more favorable and Mexico has free-trade status with the United States.
Another issue is that many companies who build car parts are also being built in Mexico for import into the United States. They can supply parts easily and quickly to auto makers who are locating there. Japanese companies planning to build in Mexico include Nissan, Hyundai and Honda.
A plant is currently being built in Mexico as we speak for Honda. This will be an enormous plant that will cost an estimated eight hundred million dollars. It is expected that this factory will open sometime in 2014. It is expected to build over 200,000 cars annually.
Furthermore, the new plant is expected to help Honda build its vehicle capacity in North America from 1.63 million units to 1.83 million by 2014. It also has plants in Indiana and Ontario Canada. Statistics show that more than 87 percent of Honda and Acura cars and light trucks sold in the U.S. market were constructed in North America in 2010. Acura is the luxury car division of Honda.
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It looks as if more cars than ever will be built in Mexico. The automotive industry has gone global and companies will go where labor costs the least.
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