London – Geographical proximity to a key market, cheap labour and good quality products have made Mexico an investment hotspot for the automotive sector and its supporting industries – as evidenced by a growing list of project announcements in the country.
According to Reuters, the country, which mainly exports to the US, is now the fourth-largest exporter for the automotive industry, after Germany, Japan and South Korea, with leading manufacturers such as Nissan, Honda and Ford putting in investment there.
The growth spurt of the last few years can well explain why US tire-maker Goodyear chose Mexico over home as the location of its new greenfield plant in 2015 and why Michelin announced the construction of its second production site there earlier in August.
The Akron-based tire-maker is well under way with its €500-million tire factory in San Luis Potosí, 120 miles to the north of the city of Guanajuato. Production there is scheduled to start by mid-2017.
Michelin’s €450-million investment is the French tire-maker’s 21st North American factory, eight years after it originally planned it.
“I’m really excited because a few years ago, in 2008, I had to come to this country to postpone our investment because of the [global financial] crisis,” Michelin CEO Jean-Dominique Senard told ERJ’s sister publication Tire Business.
And according to Scott Clark, executive vice president and COO of Michelin North America, the new plant in León will be within a three-hour drive of 18 car maker assembly plants.
“The last time we launched a greenfield passenger tire plant in North America was over 30 years ago. So this is not something we do every day.
“This is a big deal and this is exactly the right place to be and at the right time,” said Clark during the ground-breaking ceremony on 22 Aug.
And the growth plans in Mexico are not exclusive to Michelin and Goodyear.
Just two months before Michelin, Pirelli Tyre SpA broke ground on a €176-million expansion of tire capacity at its four-year-old car and light truck tire plant in Silao, in Mexico’s Guanajuato state.
Production at the plant is scheduled to begin in the second quarter of 2017, which in addition to the upgrades on the current plant, will eventually bring up the capacity of the plant to 7.5 million tires a year by 2018.
Pirelli, too, cited Mexico’s “strategic position” as a key reason for the investment, which it said would support its NAFTA development.
And Yokohama has not ruled out Mexico as a possible location for its new plant, which it is expected to announce later this year.
“We are a late entry but, as somebody said, ‘it’s better late than later’,” said Humberto Gómez, managing director of Yokohama Tire Mexico in an interview with Tire Business in July.
The company ended 2014 with 15 full-service retail outlets in Mexico and 2015 with 56. That has grown since to 73 and “will end this year with 100,” said Gómez, who added: “We also have our first Yokohama truck centre in the state of Querétaro.”
Other supporting industries have also grown significantly in the country, with US carbon black manufacturer Sid Richardson, scouting for locations in North American country.
The development of a strong talent pool over the years has also given another valid reason for investors in Mexico.
US automotive supplier Henniges broke ground on a new facility in Gomez Palacio last year, saying it would, in addition to its central location, offer “a large population of highly-skilled workers with numerous universities and technical institutes.”
And Toyoda Gosei announced in August that it was expanding its weatherstrip production in Mexico in response to growing demand by car-makers.
As far as the rubber and plastics industries are concerned, a pick-up in the Mexican currency peso is certainly going to increase the throng of investors in the country.
According to industry consultant Rafael Blanco, 60 percent of the polymers processed in Mexico are imported and raw materials supply is often a concern.
On a similar note, global rubber distributor Safic-Alcan announced the opening of its subsidiary in Mexico in August, as part of a strategy to increase its NAFTA presence.
ChemSpec Mexico, part of Safic-Alcan subsidiary ChemSpec Ltd, is based out of Mexico City, and will provide sales and technical support to the elastomer compounding industry, including tire and technical rubber production.
According to ChemSpec president Dave Moreland, with the rise in manufacturing companies throughout northern and central Mexico, more customers have asked for support for their Mexican operations.