Mexico's auto industry looks to luxury cars
Just when luxury buyers were getting used to the idea that their BMW or Mercedes-Benz could be made in the U.S., the German automaking rivals launch a new surprise: they're both planning to open plants in Mexico's auto industry looks to luxury cars Just when luxury buyers were getting used to the idea that their BMW or Mercedes-Benz could be made ... (more)Read more
#1 Jul 21, 2014
Mexico's auto industry looks to luxury cars
Chris Woodyard, USA TODAY 5:45 p.m. EDT July 21, 2014
Mexico, long a source of auto imports into the U.S., has become so sophisticated at making cars that it's now moving into luxury.
Just when luxury buyers were getting used to the idea that their BMW or Mercedes-Benz could be made in the U.S., both German automaking rivals have announced plans for plants in Mexico. So has Audi, which already has a strong footprint in Mexico through the mainstream Volkswagen brand.
While the automaking world has focused on the U.S., Europe, China and India, Mexico is quietly working its way into the big time. Mexico is poised to pass Brazil this year as the world's seventh-largest automaker, IHS Automotive predicts.
"It has become Motor City South," says Harley Shaiken, chairman of the Center of Latin American studies at the University of California, Berkeley, and an expert on auto industry labor issues.
Moving into the auto industry's top echelon, luxury car manufacturing, is an accomplishment because of finicky levels of quality required, such as the tight gaps between body panels, and more complex engineering in the product.
Now automakers will do it where the Center for Automotive Research says some workers make as little as $2.50 an hour. Total average labor costs amount to about a quarter of what U.S. workers cost, even less compared with German workers.
But it isn't just low wages luring companies to Mexico. It's also Mexico's portfolio of free trade agreements, which allow it to be a free export hub for virtually all of South America and for other countries around the world. "Mexico has more free trade agreements than any country in the world," says Joe Langley, principal analyst for IHS Automotive.
Among luxury makers, Audi arrives in 2016, followed by a Daimler/Renault-Nissan joint venture for Mercedes and Infiniti luxury cars, then BMW in 2019, says IHS Automotive. Most mainstream makers, including the Detroit 3, already have plants in Mexico and are busily expanding or adding new ones, with VW, Honda and Mazda this year, and Kia in 2016.
Mexico's automotive output will have increased 60% from last year to 2020 for more than 5 million cars. Last year, fewer than one out of five cars being sold in the U.S. were made in Mexico. By 2020, more than one out of four will be built there.
Although German luxury makers made headlines with their decision to build Mexico plants, the real breakthrough came with Japanese makers, says Langley, as they realized their vulnerability in their home country after the earthquake and tsunami in 2011 and began to diversify to Mexico.
The Top 10 automaking countries in vehicles built in 2013, the latest full year of data:
5.South Korea 4,460,778
#2 Jul 21, 2014
Although Mexico is the 7th producer of cars (in reality it already overtook Brazil, numbers above are not accurate), is the 4th exporter of the world.
There are serveral things not mentioned in the article that I consider inportant:
1.) The decision to make BMW and Mercedes in Mexico was almost inevitable... since few years ago, these brands already buy much of its parts and components from Mexican companies that are booming here.
(Recently, some of this Mexican companies are building facilities around the world, for example, in Russia).
2.) Mexico is beginning to produce annualy more ingineers percapita than Germany, and those are being accomodated without problem in our growing industrial sector.
The message is that this expansión of automotive industry in Mexico is not a fluke, something random, haphazzard, etc.... it has a lot of basis behind, that make it almost inevitable.
In just few years, regarding the auto industry, Mexico will compare with Germany in production and export.
#3 Jul 21, 2014
I was wondering, why nobody has tried instead to make a car that could serve the people in Mexico. A cheap, with an eficient use of gasoline to encourage local consumption making attractive for the poorest citizens the idea buying brand new cars.
I keep hearing that for a country to become developed it needs to boost its own consumer market, so it looking for cars that fulfill the needs of the average citizen should also be important.
#4 Jul 22, 2014
I kind agree with you on this one. Mexico also is just the labor part of this equation. Do you mean Mexicco to design and market this car? They are not building their own cars, that were developed in Mexico. The owners of these lines, from BMW, Ford, Chevy and and others are making all the money. People in higher positions in the manufacturing positions in the plants. Just like the poor in China who make less than $2.50 per day. These manufacturers guarantee the majority of the people that work in these plants pure poverty. I have read about the people that work in them taking buses to and from work and living in houses with dirt floors. Good for the rich, and mangers, but in actuality guarantees that the minimum wage of $5.50 a day will stay in place for a long time in Mexico. If the wages get too high, it is less of an incentive to built outside of their own country where they are from. That is one reason why they are being built they are built in poorer countries. Just like clothing, electronics and more.
On another note there are a lot of small economy cars being purchased in Mexico. Atoz, Peugeot and more. In Chihuahua, just like in the USA, people here like the big trucks. Why do new and used cars cost so much more in Mexico than in the USA with the income is much higher? You would think they would be less costly to accommodate people with lower incomes. When you see the buses are full here all day, and many of them. Packed to the gills, you know a lot of people cannot afford the high prices of the cars. Mexico needs to develop and design their own electronics, cars and more. Almost all electronic products are far more expensive in Mexico. A lot more. If someone could develop their own name product and manufacture it here, they could get rich and grab a huge part of the market here.
Am I missing something?
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