Is Audi luring the German carmakers to Mexico?

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The interest in Mexico manufacturing is continuing to grow with additional automotive plants looking set to be built in the near future. Since announcement from Audi for creating their first plant for assembly and production in Mexico, automakers have found Mexico very likable for expanding automotive operations.

Audi confirmed plans for a $1.3 billion plant which is set to open in the next three years in San José Chiapa, Puebla. Plans have already been made for this new Mexican plant to be the sole global source for the Q5 model of SUV when it opens in 2016. Mexico has been highlighted as an ideal base for exports because of its geographical location between South and North America. Mexico also has a number of free trade agreements, a well-educated labor force and a close proximity to a lucrative market in the United States and the growing market in South America. These attributes have had a number of automotive brands queuing up to set up operations in Mexico, bolstering the Mexican economy.

The Audi announcement came shortly after Japanese brand Honda had committed to plans to construct a $470 million plant in Guanajuato. These major automotive brands are following in the footsteps of Mazda, Nissan, General Motors and Ford who have all announced plans for new plants.

This love of Mexico from the automotive industry has given the Mexican economy a huge boost, with it looking set to surpass Brazil as the largest economy in South America in the very near future. In the last year alone Mexico had attracted almost $4 billion in investments just from the automotive industry.

Since the year 2000 Mexico vehicle production has risen by almost three percent per year, while the United States and Canada are experiencing declines. This growth trend looks set to continue through to 2018 when the production forecast for Mexico is estimated at five percent annually. Mexico is currently the eighth largest manufacturer of automotive products in the world, but according to these estimates, this figure should only grow.

The Audi executive team has praised the competitive costs, free trade agreements and good infrastructure of Mexico as their reason for their chosen new plant site. The new plant looks set to be the size area of almost 400 soccer fields and will be located near to the Volkswagen plant in Puebla City. Since Volkswagen has announced that it intends to boost vehicle sales in the United States to a million vehicles over the next five years, with 200,000 of these vehicles from the Audi branch of the company, the new manufacturing facility could be a key factor.
The new production plant in Mexico is also included in plans for Audi to hit global annual sales of two million by 2020 and allow them to challenge luxury rivals such as BMW, Mercedes-Benz. With Mexico’s free trade agreements expanded to 44 countries, the new production plant will also help to achieve this goal. All these factors will soon have even more major auto plants being built to allow Mexico to develop into a serious car manufacturing industrial power.

IHS analyst Guido Vildozo, declared a couple of weeks ago, that two more plants were on sight. Now, several news on the internet point to BMW to be the next Plant to hit Mexico to produce Series 3. Apparently, BMW is already discussing terms with local authorities of the north and centre of the country. State of Queretaro appears to be the top contender. The Plant could start from 40,000 units, growing up to 150,000 units annually.

Other news point to Mercedes Benz considering a joint venture with Nissan for manufacturing either the A-Class hatch or the CLA four-door coupe in Mexico. Mercedes is also scouting for locations of the new plant and considering all other factors.

As Audi is setting the pace and luring BMW and Mercedes Benz into the Mexican Auto Cluster, several news over the internet remarked the interest of Tata, Infinity (Nissan) and Ferrari in Mexico.

Audi is luring the German luxury automakers to fight over the North America market. Will Mexico be charming enough to lure the others? It certainly has the infrastructure, regulation, export incentive benefits (IMMEX), the free trade agreements, qualified workers, great location and many other features. And when that happens, companies need to be prepared for an open season for resources and talent.

Topics:  Automotive Industry, Manufacturers, Mexico

Published In: International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Alberto Esenaro, Alberto Esenaro | Attorney Advertising

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