Demand for heating, ventilation, and air conditioning (HVAC) units is poised to take off, leaving HVAC suppliers to make decisions on how to keep up. For many such companies, a move to Mexico may be an ideal solution for ramping up production for a steady, cost-effective supply of HVAC units or system components.
Mexico is home to a strong HVAC manufacturing industry cluster. In 2019, the country exported roughly $4.1 billion in air conditioners alone, mainly to the United States, making it the third-largest such exporting nation in the world. About 90% of all HVAC units shipped to the United States are produced by companies that manufacture in Mexico.
With its strong supplier network and easy accessibility to the world's largest market, Mexico is a logical choice as a manufacturing location—as most of the top HVAC equipment manufacturers have already discovered. 
Top HVAC equipment manufacturers face growing demand
There are a number of reasons for HVAC suppliers to expect growing demand for their materials, starting with increasing housing demand in the U.S. There has also been an increase in incentives for energy-efficient equipment, encouraging many homeowners to make upgrades to their existing systems.
Finally, improved ventilation through an HVAC system capable of accommodating a MERV-14 rated filter has become a leading recommendation for creating healthy indoor air during the COVID-19 pandemic. As nonresidential building owners set aside or secure funding to make upgrades, top HVAC equipment manufacturers can expect demand to rise considerably for quality HVAC systems.
All told, Grand View Research projects that the global HVAC systems market will register a CAGR of 6.1% from 2020 through 2027.
Of course, providing high-quality units at a reasonable cost will be key for securing a competitive edge. That's where Mexico comes in. The country has long been a stronghold for HVAC equipment manufacturing, from the structural sheet metal cases and copper or aluminum tubing to heat exchangers, pumps, and wiring fitted within the final units.
The Wisconsin Economic Development Corp. reports that Mexico is home to more than 600 companies serving the HVAC sector, including Tier 1, 2, and 3 suppliers. These include HVAC manufacturers Carrier Corp., Goodman Manufacturing Co., Lennox International Inc., Nortek Global HVAC, Rheem Manufacturing Co., Trane Inc., and York International Corp.
Why manufacture HVAC products in Mexico
A strong part of Mexico's appeal comes from the availability of high-quality, cost-effective labor. There's a common misconception that low-cost labor is the only reason top equipment manufacturers have moved to Mexico. The truth is, low-cost labor is an advantage, but it's only one of many. This competitively priced labor also offers the benefit of experience and training to meet manufacturing demand. Because the federal and state governments have committed to incentivizing foreign investment, manufacturing training has long been a priority in Mexico. The result is an infrastructure that includes several leading technical universities and extensive options for vocational training.
In addition, Mexico's labor force of more than 58 million people as of 2020 has trended consistently upward in the last decade. This steady upward population trend means that manufacturers don't have to fear the skilled labor shortages that some other countries face. Mexico makes it easy for HVAC suppliers to connect with workers with some manufacturing experience or opportunities to customize worker training for their specific assembly and production needs.
Where HVAC companies have factories in Mexico
Another reason for Mexico's appeal as a site for the HVAC manufacturing industry stems from its robust network of electronics, automotive, and aerospace industry suppliers. Many of these companies share infrastructure and, in some cases, suppliers. In fact, HVAC manufacturing is heavily located in those states with automotive or aerospace manufacturing clusters, including Queretaro and Guanajuato. HVAC suppliers can also be found in Chihuahua, Tamaulipas, Nuevo León, Mexico City, and Saltillo, Coahuila.
In some cases, suppliers opt to locate in Mexico specifically to provide cost-effective proximity to OEMs. That's why it helps to know that York, Carrier, and Trane can be found in Monterrey and Lennox in the nearby auto manufacturing hub of Saltillo, while Nortek Global (formerly Nordyne) has a location in both cities. Goodman Manufacturing Co. parent Daikin, the world's largest HVAC manufacturer, operates in the fast-growing industrial location of San Luis Potosí in central Mexico. Rheem manufactures just minutes from the Texas border in Nuevo Laredo.
Of course, proximity to the U.S. market is among the many attractive features of operating in Mexico and a factor that will be increasingly important as companies navigate supply chain bottlenecks. Many companies are recognizing that proximity to the countries into which they sell is an excellent reason to relocate their manufacturing. Localized supply chains help suppliers reduce the risk of transit delays and help manufacturers better respond to fluctuations in demand. With its network of highways and railways and deep-water ports on both the Atlantic and Pacific Coasts, Mexico makes it easy for HVAC suppliers to get products quickly to market.
An added benefit? With more free trade agreements than any other country, Mexico makes it easy and cost-effective for HVAC suppliers to move goods across borders.
Develop a strategy for manufacturing success in Mexico
With HVAC demand ready to grow, now is the time for HVAC suppliers to reevaluate their strategy for ensuring they're able to provide a steady supply of critical components to their customers. As many top HVAC equipment manufacturers are coming to recognize, easy access to a localized HVAC supply chain with ample labor availability will be key to ensuring a competitive edge in the years to come.
While HVAC suppliers have found success in a number of locations across Mexico, each company should evaluate location options carefully to position their own success. This is an area where Tetakawi can help. Whether you're looking for customized site selection services or are ready to start operating in one of our ready-to-lease manufacturing communities, Tetakawi can help HVAC suppliers quickly establish factories in Mexico.
If you're ready to position your company for success in Mexico, contact Tetakawi today.
Thinking about manufacturing in Mexico? Download this ebook and start moving your due diligence forward.
