Mexico is well on its way to becoming the number one car exporter to the US. The current title is shared by countries such as Japan and Canada, but it is expected that Mexico will take the spot in the near future. This change will be a massive boom for Mexico’s economy and its manufacturing industry.
This growth in Mexico’s economy was brought about by the wave of companies planning to set up their plants throughout the country. The Japanese automobile manufacturing company Honda announced that it is planning to set up an $800 million plant in the state of Guanajuato. The plant will produce approximately 200,000 Honda Fit hatchbacks a year which will extend the amount of Mexican cars imported to the US to 1.7 million. This means that by the end of 2014 Mexico will be exporting 200,000 cars more than that of Japan. By the end of 2015 Mexico is expected to surpass Canada with the help of another plant currently under development scheduled to start production next week.
Honda is not the only car manufacturing company who plans on opening a plant in Mexico. Mazda has revealed its plan to open a plant which is expected to produce 230,000 cars per year. Even Audi plans to set up shop to manufacture their luxury cars at a plant that is set to open somewhere in 2016.
Experts have identified the reason that international corporations such as Honda and Nissan have expressed interest in opening plants in Mexico. Apart from the flourishing industry the minimum wage rate is quite low. Roughly around 580,000 workers are employed in the automobile industry and since 2008 this number has risen exponentially. An average autoworker in Mexico earns approximately $4 an hour, compared to the $55 an hour the average US autoworker earns. For this reason companies are able to obtain cheap labor hence maximizing profit. Whatever the reason, these companies are sure to put Mexico at the number one spot for exporting the most cars to US.
Although this progress will have a positive effect on the country’s overall economy, it will also prove challenging to local businesses. Competition will now be tougher than ever as these businesses will be facing international competition. As the new plants belong to well-known corporations it is possible that the general public will be attracted more towards them with regards to employment opportunities and car dealerships. Preexisting plants and manufacturers in Mexico will hence find it much more difficult to stay in the market and attract customers. Even local government bodies have started competing for the plants by offering tax exemptions, improving the quality of highways connecting the plants to Mexican ports and American borders and even training their employees.
Economy Secretary Ildefonso Guajuardo said that the country has started to build up momentum. According to Guajuardo, Mexico is becoming the focal point of the worldwide automobile industry as it has proven itself to possess quality in production and a friendly environment to invest in. Mexico might not as yet be leading the list of car exporters to the US, but these new developments are sure to land the country in the number one spot soon.
By Hammad Ali