Mexico is quickly turning into the China of the West

Article by Anita Panait, on October 29, 2013

Carmakers from Japan and Germany are leading the $10 billion worth of plant building extravaganza in Mexico through 2020, as they try to take advantage of the benefits offered by the country, according to parts suppliers and researchers. BMW AG, Toyota Motor Corp and Mercedes-Benz all are expected to disclose at least $2 billion of agreements in the next year or two, supplier and other industry sources told Reuters.

That adds to almost $6 billion in announced factories by Nissan Motor Co, Honda Motor Co, Mazda Motor Corp and Volkswagen AG. Carmakers from the United States are investing $1 billion or more to upgrade their Mexican plants. Nissan and VW also are thinking about expanding existing plants for a spending of around $1 billion or more, sources familiar with their plans told Reuters.

While the vehicles produced in Mexico will mostly be sold in the US, the domestic market is also experiencing a rise. Likewise, it is expected that vehicles exported to outside of North America will surge faster than those to the US.

Joseph Langley, a senior analyst at research firm IHS Automotive, told Reuters that Mexico "is quickly turning into the China of the West," citing the country’s low wages, a strong supply base and a global network of free-trade agreements.

According to the Federal Reserve Bank of Chicago, Mexican vehicle exports to outside North America are rising even faster than those within, accounting for almost 30 percent of the 2.4 million units in 2012. [source: Reuters]

Topics: mexico, china

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