Why and How Manufacturers Invest in Coahuila

November 06, 2020

Coahuila, Mexico's third-largest state, is home to a robust manufacturing industry—and it's hardly any wonder why. The state shares a 318-mile border with the United States, making it a strategic location for manufacturers seeking a central distribution location. Its population of more than 3 million people has been commended for having the country's second-highest level of productivity. What's more, the state capital Saltillo has long been home to Chrysler and GM's automotive facilities and, consequently, has helped contribute to a robust supply chain. 

However, the state is only getting hotter for manufacturing investment. Below we'll discuss why more manufacturers are considering Coahuila and how you can strategically prepare your launch to maximize these benefits. 

Why Coahuila is attracting manufacturers

In 2019, Coahuila saw USD $13.5 billion in international sales. A majority of those exports (90.9%) went to its northern trading partner, the United States, followed by exports to China, Brazil, Germany, and China. 

Most of those exports were on behalf of the automotive industry. According to 2018 data, the leading exports were for vehicle parts and accessories (USD $4.21 billion), automotive seats (USD $1.89 billion), and engine parts (USD $948 million). While automotive exports have long been critical for Coahuila, that will only increase now that the USMCA has been implemented, with its increased requirements for North American-generated content. 

For Coahuila, this began in the 1980s, when both GM and Chrysler launched facilities in Ramos Arizpe, a city in the Saltillo suburbs within the state's southeastern region. 

Today, GM's facility produces propulsion systems, mid-size SUVs like the Chevy Blazer, and houses stamping operations. It has helped contribute to GM's role as the largest vehicle producer in Mexico. As GM ramps up production, it is likely to turn more frequently to local suppliers. 

In nearby Saltillo, Fiat Chrysler has reconfirmed its commitment to the state by repurposing a facility in Saltillo to produce Ram truck products despite pressure to move manufacturing elsewhere. These commitments to manufacturing in Mexico provide a good reason for automotive component and electronics manufacturers and metal and advanced material fabricators to invest in Coahuila.

Determine the right site for manufacturing in Coahuila 

Map of Saltillo Coahuila

Manufacturers considering establishing a maquiladora in Coahuila have a number of factors to consider. Chief among them is site selection. For many foreign investors considering Coahuila, Saltillo is a clear choice. The city is a mere 50 miles from Mexico's more expensive industrial center in Monterrey and offers easy access to Houston, Texas. It is linked to the U.S. and the rest of the country through two rail networks and international highways, as well as an international air terminal in Plan de Guadalupe Saltillo. 

Larger manufacturers opt to locate just outside of the city in surrounding regions, such as Ramos Arizpe or Derramadero, to reduce the cost of locating in the more urban and more competitive Saltillo center. Some companies may even choose to locate in Torreon, which is about 160 miles west of Saltillo. This choice may require manufacturers to offer more amenities, such as onsite cafeterias or workforce busing, to attract employees. There also may be limitations to available infrastructure with which to contend. 

Manufacturers eager to launch more rapidly may instead look toward a Manufacturing Community, an industrial park with onsite support services and amenities to support manufacturing. For example, locating within the Zapa Manufacturing Community in Saltillo allows manufacturers to ramp up production in a Class A facility in as little as 30 days, all with a range of support and advisory services. 

 

A strategic approach to investment 

Site selection will play a significant role in the costs of your operation, but reaping all the potential benefits depends upon taking a strategic approach to how you invest. This is an area where a partner like Tetakawi can offer a significant advantage. 

Companies have the option to work under the full umbrella of our services as a shelter provider or may simply select among our Start-Up and Support Services for assistance in navigating the nuances of operating in a foreign country. This type of guidance can mean the difference between being stuck in bureaucratic red tape or trusting in the process while you focus on the operational work that you do best. 

However, one area too often overlooked is our role as an intermediary between the manufacturer and the state and local government. In this role, Tetakawi can support manufacturers in negotiating for the types of financial incentives that have attracted so many companies to Mexico and can help you more affordably launch a new operation. 

Coahuila has set a process for applying for state-funded incentives. However, going into this process with clear expectations for what is possible can give you an edge. If you're ready to take this next step, contact Tetakawi today.

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