Mexico seen to become 4th largest maker of German luxury cars

Article by Christian A., on November 28, 2014

By 2020, Mexico will become the fourth largest producer of German luxury cars next to Germany, China and the United States, according to estimates compiled for Bloomberg by IHS Automotive consultant Guido Vildozo. That means that Mexico is expected to surpass Belgium, Spain and Brazil as top producers for German carmakers.

In fact, Mexico is not only becoming a production hotbed for luxury carmakers, but also for mass-market brands as well. Since 2012, German luxury carmakers BMW, Audi and Mercedes-Benz have decided to produce cars in the country.

Just this year, BMW Group has elected to build plant in Mexico. IHS Automotive Managing Director Michael Robinet remarked that Mexico has become the “crossroads of automotive trade for the western hemisphere," adding that the country has proven it can build “a vehicle of any stripe."

But pioneering the shift to Mexico were luxury carmakers while they volume counterparts are following suit. For instance, South Korean carmaker Kia Motors Corp. disclosed in August an investment of over $1 billion in Mexico, while Toyota Motor Corp. announced that it is reviewing plans to expand its manufacturing operations in the country.

Not all were good news for Mexico though, as it has been recently tagged as the source of some of Takata Corp.'s faulty air bags linked at least five deaths. Despite that, investments coming from the global auto industry keep on pouring into Mexico.

Armando Soto, president of Kaso & Asociados, remarked that German luxury carmakers made their decision to produce in Mexico thanks to increasing factory quality and a hike in engineers, as well as a growing domestic parts industry.

Bernhard Eich, the BMW director for the new San Luis Potosi site, remarked that building cars in Mexico “was quite an easy decision," noting that the carmaker is confident of finding skilled workforce and has a huge supply network in the country.

The site will start production in 2019 while Audi will start operations in 2016. Daimler, meanwhile, will build Mercedes and Infiniti compact cars at its site starting 2017.

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