By: Stephen Downer
December 13, 2013
PUEBLA, MEXICO — Plastic injection molded components for the automotive industry are 20 percent cheaper to make in Mexico than in the United States, according to a financial expert speaking at a major sector conference in early December.
“The production of auto parts in Mexico is 13 percent cheaper than in the United States,” Alfredo Espino, managing director in charge of international finance at GE Capital Mexico, told the two-day MexicoNow conference. “Plastic injection molded components are 20 percent cheaper in Mexico than in the U.S.”
Leo Torres, Ford Motor Co.’s purchasing and STA director in Mexico, also touched on the subject. “Engineering costs in Mexico are 46 percent cheaper than in the United States,” he said.
Among other plastics-related issues, Thomas Karig, a vice president in charge of Volkswagen AG’s corporate relations and strategy at the German company’s Mexico headquarters in Puebla, said the tool making situation in Mexico is improving.
“In Puebla we have two European tool makers setting up shop,” he told Plastics News outside the conference.
In 2010 Karig said most molds used by VW in Puebla were imported, usually from the United States and Canada, with suppliers’ technicians traveling constantly to and from Mexico. There was a need for more toolmakers to establish operations in Puebla.
Meanwhile, South Korea’s Hyundai-Kia Automotive Group appears likely to be the next car maker to build an assembly plant in Mexico.
“We are still waiting for Hyundai to make an announcement. [But] I’m sure they will come in,” Ford’s Torres told delegates.
Mexico already has 15 light vehicle assembly plants in operation, with three more under construction. The sector produced an unprecedented 2.76 million light vehicles through November, 2.4 percent more than the 2.70 million assembled in the same period in 2012, according to industry group the Asociación Mexicana de la Industria Automotriz AC (AMIA).
Headquartered in Seoul, Hyundai has denied that it has any manufacturing plans for Mexico. But in September, Mexico’s Economy Minister Ildefonso Guajardo told Bloomberg the federal government had held talks with both Hyundai and BMW Group, one of which, he said, might announce plans for a new assembly facility in the country in 2014.
Brands produced in Mexico include nameplates from Chrysler, Fiat, Ford, General Motors, Nissan, VW, Toyota and Honda. An Audi AG plant being built in the state of Puebla will start producing the Q5 SUV in 2015, making it the first European luxury vehicle to be built in Mexico. It will be Audi’s first assembly plant in North America. Matthias Müller, Audi Mexico’s CEO and plant project director, said 25,000-30,000 people have applied to work at the facility.
“Our goal is to have 65 percent local content by the start of production in 2015,” Müller said. “We are looking for 90 percent local content within five years,” he added.
Mazda Motor Corp’s Salamanca plant in the state of Guanajuato is scheduled to begin operations in early 2014. It will also produce a small car for Toyota Motor Corp. Honda Motor Company Ltd’s second vehicle assembly plant in Mexico, in Celaya, which is also in Guanajuato, is slated to open in 2014 as well.
“The automotive and auto parts industries invested $13.2 billion in Mexico between 2006 and 2012, an 8.8 percent share of total foreign direct investment received by Mexico in that period,” AMIA President Eduardo Solís told the conference.
The Mexican automotive industry is the eighth largest light vehicle manufacturer and fourth largest exporter in the world, he said. It accounts for 3.3 percent of total world light vehicle production and for 23 percent of the value of Mexico’s industrial exports, according to Solís.
“We export five times more light vehicles than Brazil. From January through October we exported 2.03 million light vehicles, up from 1.98 million for the same period in 2012.”
Solís added that five years ago Mexico accounted for 5 percent of the light vehicles produced in North America. “Canada had a 16 percent share and the rest [79 percent] came from the United States. Now we have a 19 percent share.”
Oscar Albín, executive president of Mexico’s national supply industry association, estimated the value of Mexico’s auto parts production in 2013 at $75.2 billion, compared with $73.3 billion in 2012 and $57.7 billion in 2007. He expects production to grow steadily and to touch $91.9 billion in 2019.
“We want to turn Mexico into one of the top three world destinations for vehicle and auto parts and components design and manufacturing,” Albín said.
Several speakers at the event spoke of the expertise within Mexico’s automotive and auto parts industries. “Some people think that in Mexico we produce the simple parts,” said Ford’s Torres.
He pointed out that, among other projects, Ford produces the sophisticated Land Rover engine in Mexico. “Why do we think the future’s bright?” he asked. “In 2008 there were 225 engineers at Ford Mexico. By the end of 2013 there will be 985 and by 2016, 1,400. Our engineers are working on global programs, such as the Mustang.”