Mexico's Automotive Industry and Tijuana as an emerging strategic automotive manufacturing destination


Officially in 1921 the first automotive company was established in Mexico, this was back when Buick inaugurated it's first assembly facility in the country, soon after in 1925 Ford Motor Company launched what for some time remained the largest automotive production operation in Mexico, and subsequently other international groups followed, so much that by 2010 most of the larger brands has presence in the country. Today companies such as BMW, Chrysler, Ford Motor Company, General Motors, Honda, Kia, Nissan, Mazda, Toyota and Volkswagen have substantial operation in Mexico, its estimated that together nearly 3 million vehicles are now manufactured yearly. Some Chinese companies such as BAIC and FAW have been exploring the country for a few years and now have some formal presence in the country, growth of Chinese investment is expected within this field in the coming years.

For automotive companies that come from continents such as Europe and Asia, the attractiveness of having facilities in Mexico is on one side the proximity to the north American markets particularly the United States and Canada, which Mexico has free trade agreements with and which signify one of the largest consumer markets for this sector, however Mexico and the LATAM region are also fast growing markets where the potential for development also is attractive, especially because Mexico also has free trade agreements with most of the region and across the Atlantic with Europe.

Mexico is the seventh largest light vehicle manufacturer and the third largest light vehicle exporter in the world reaching an all time production record in 2017 of 3.77 million units, a record amount of exports of 2.77 million, and a record amount of shipments to the U.S. market of 2.34 million units, respectively representing growth of 8.9%, 16.7% and 9.4% in comparison to 2016. This was fueled by one of the most attractive car markets in the world, the USA car and light truck market happened to have an excellent year, which was also the culmination of a seven year streak of annual growth, 17.13 million units where sold in 2017 where Mexico supplied 13.63% of new light vehicles sold, that accounts for 75% of Mexico's total exports, this number was only surpassed by an all time record of 17.55 million vehicles sold in 2016.

It is estimated that the automotive manufacturing industry represents over 3.5 percent of the nation's GDP and over 20 percent of manufacturing GDP value in the country.

Because of the strong history and having multiple internationally respected groups manufacturing award winning vehicles for decades, Mexico now offers a sophisticated and solid ecosystem that is highly attractive to international firms, when it comes to supply chain development, cluster integration, government support and qualified labor, Mexico is definitely an ideal platform opened for new investment and not only that, but most importantly, it still represents a fraction of the cost in comparison to manufacturing either in Europe or North America.

Sharing a border with San Diego California on the North and the Pacific Rim with Asia on the West, Tijuana sits on the northwestern corner of Mexico and is well known as one of the most international and dynamic borders in the world, in terms of international business Tijuana also harnesses a wide array of industries that are mainly comprised of foreign investment, assembly, manufacturing, services and even technology development can be found here not only on a large scale but also at a high level of sophistication that has been attained through several decades of experience, joint efforts between government, academia and the private sector have allowed the region to have a sense of direction when it comes to economic and industrial development, this also permits foreign groups to encounter a professional setting where establishing operations can actually be a great experience. Over the years Tijuana City has positioned itself not only as one of Mexico's most professionalized manufacturing hubs within the country but also has been able to project itself at an international level through the results that foreign investors have experienced when establishing and operating world class international manufacturing facilities here.

Automotive is not the exception and trough foreign investment, professionalized institutions, government and private enterprise Tijuana has been building an automotive ecosystem for years while receiving large manufacturers such as Toyota which manufactures the Tacoma Truck in Tijuana since 2005 and employs over 1,200 workers and Hyundai which has operated for nearly 30 years now in Tijuana and at the moment owns 6 facilities in the region employing over 9,000 workers. The potential for growth is strong and more Asian groups are realizing it. In recent years the automotive industry has shown an increase of 4-5% per year in Baja California.

With salaries approximately 40% lower than the United States, and with a workforce of 14,600 employees, Tijuana has become an important place for auto parts and automotive manufacturing in Mexico. Within Tijuana's FDI promotion strategy Automotive is definitely among the targeted industries, the objective is to allow and stimulate this sector to grow, what this means for a foreign company is that they will be met with a professionalized environment, a support system that integrates government, education and private institutions so that all needs are met and the process for establishing presence will be high level and efficient.

As part of the effort of Tijuana city to collaborate with Chinese autoparts and automotive sectors, in 2009 Tijuana City signed a sister-ship agreement with the City of Changchun, Jilin Province's capital and the automotive capital of China, Changchun produces as a city over 1 million vehicles per year and harnesses the likes of FAW Group and a large array of auto parts and automotive Chinese groups, now that Chinese businessmen can fly directly to Tijuana out of Beijing, the potential has become better than ever.

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