- Manufacturing in Mexico
- About Tetakawi
September 23, 2021
Due to its location on the U.S. border, Nogales has become a popular site for manufacturing companies looking to reap the cost advantages of operating in Mexico. The city spans the borders of Sonora, Mexico, and Arizona with access to either country via the Mariposa Port of Entry. A diverse range of companies in the automotive, aerospace, electronics, and consumer products manufacturing industries have located facilities here. However, Nogales’ prime location means the city also commands higher wages and real estate costs than in other areas of Mexico. Furthermore, manufacturing companies in Nogales experience higher employee turnover rates than other parts of Sonora.
Nogales provides a fine location for many manufacturers. Still, other locations within the Arizona-Sonora mega-region can provide a strong manufacturing base from which to work, with similar ease of access to the U.S. market. By considering options further south, but not too far, manufacturers may find they can strike a better balance between low manufacturing costs and available skilled labor.
Nogales’ manufacturing industry benefits in part from the robust aerospace manufacturing sector in Arizona. Arizona is a top-five leader in U.S. aerospace and defense manufacturing, and companies including Honeywell Aerospace have global headquarters there. This has created synergistic opportunities for manufacturers to source components from companies operating in Mexico. Numerous aerospace manufacturing companies can be found on either side of the U.S.-Mexico border, including EATON Nogales and B.E. Aerospace, which provide aircraft engines and parts.
This symbiosis has jumpstarted the growth of aerospace manufacturing throughout Sonora, making the state home to one of the fastest-growing aerospace industry clusters in the country. Today, more than 69 aerospace manufacturers can be found in areas across the state, including many located in Guaymas, which is home to over 13 aerospace companies.
Electronics manufacturing is another key area of focus for Nogales manufacturing companies, many of whom support aerospace, automotive and consumer products sectors. Similarly, the city has become home to injection molding manufacturers that can support the need for lightweight components across a range of manufacturing sectors.
Some manufacturers opt to locate their manufacturing operations in Sonora while locating warehouses or distribution hubs in Arizona. In some cases, this can help companies making low-value shipments benefit from de minimis duty-free exceptions.
Nogales’ manufacturing may have sparked the close relationship between Sonora, Mexico, and Arizona, but the impact of this engagement has been felt throughout the Mexican state. The government-led Arizona-Sonora mega-region was launched to promote business opportunities between these two states and has consequently developed a cross-border manufacturing powerhouse. These opportunities have helped develop a number of cost-effective manufacturing alternatives further south along Highway 15.
Today, more manufacturers than ever are looking to benefit from operations in Sonora’s southern manufacturing triangle:
· Hermosillo: Less than 200 miles south of Nogales sits the capital of Sonora, a manufacturing center in its own right. Ford Motor Co. established its Stamping and Assembly plant here in 1986, jumpstarting a robust automotive manufacturing industry. More recently, this cost-effective manufacturing expertise has led to growth in the city’s aerospace, medical device, and electronics manufacturing sectors.
· Guaymas: A two-hour drive south of Hermosillo, this large coastal municipality is home to the second-largest port on the Pacific coast. It’s this ideal location for global export that has grown a significant manufacturing industry in Guaymas. Today the city is one of Mexico’s premier sites for high-tech manufacturing, with a particular focus in the aerospace sector.
· Empalme: Nestled by the nearby, larger municipality of Guaymas lies Empalme, a quiet city with a population of just over 51,000 people. Manufacturers have been attracted to the city as a more cost-effective location for manufacturing and a quieter lifestyle for foreign nationals (albeit, with easy accessibility to local coastal tourist destinations). As a result, the city has seen infrastructure investments to support manufacturing, such as the Bella Vista Manufacturing Community.
Much like Nogales to the north, this manufacturing network has the benefit of a labor force with access to a host of excellent educational opportunities and technical training facilities. The key difference is that costs to the south of the economic free zone along the northern border are more competitive for many manufacturers. For example, a machinist in Hermosillo might see an average rate of $75 MXN/hour compared to $98 MXN/hour in Nogales.
There is greater real estate availability in southern Sonora as well, with Empalme’s Bella Vista and Hermosillo’s Rio Sonora Manufacturing Communities offering buildable space to lease in combination with a range of shelter services.
U.S.-based manufacturers looking for a competitive edge in serving the aerospace, electronics, and related manufacturing sectors have long looked to Sonora as a cost-effective alternative manufacturing location. Now, manufacturers are recognizing that they can strike a stronger balance of benefit by exploring manufacturing locations further south of the border.
Working with a partner that understands cost variations can help. Tetakawi’s decades of experience assisting companies in launching manufacturing in Mexico has provided us with unique insight into costs and other trends that could impact your launch. We can provide clients with cost estimation, real estate, and a complete range of shelter services to get your operation up and running faster.
If you’re ready to explore competitive options for manufacturing in Sonora, Mexico, contact Tetakawi today.
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