Japanese carmakers seen to benefit from Mexican output base

Article by Christian A., on March 11, 2014

Mexico is quickly becoming an important manufacturing base for Japanese carmakers. As proof of that, Nissan, Honda and Mazda have opened assembly plants in the country within just four months. With their 605,000 units of additional capacity, Mexico could become the world's No. 1 auto exporting country to the United States as early as 2015.

The presence of these Japanese carmakers in Mexico renders them more potent in challenging American and other brands in the US. Their Mexican production base also allows them to cater better to the fast-growing local market, which is traditionally dominated by Detroit 3. Likewise, Mexico provides Japanese carmakers a launching pad for exports to Latin America and Europe, where their brands are small but growing.

"Anything that makes Mazda more profitable will help us," remarked Tom Carey of Ramsey Mazda in Urbandale, Iowa, who attended the opening ceremony of Mazda’s Salamanca plant. He is also chairman of Mazda's national dealer council. He remarked that higher margins from Mexico mean Mazda will have enough funds to finance its marketing or improving content.

The same could be said for other Japanese carmakers. "They can greatly improve the profitability of small cars," said Masatoshi Nishimoto, an analyst at IHS Automotive. "They can reduce incentives and get more flexibility on pricing." With it Mexican base, Mazda Chairman Takashi Yamanouchi said that the carmaker’s Salamanca plant is the company’s new “profit center."

Turning to Mexico allows Japanese carmakers to get larger margins from lower cost manufacturing as well as avoid tariffs on car and truck imports into the US. Having a Mexican production base also allows them to mitigate exchange rate losses from yen-based Japanese exports as well as improve product availability with a shorter pipeline to dealers. [source: automotive news - sub. required]

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