Mexico’s Automotive Industry is Cruising Along

Canada dropped in position among the leading global manufacturers of automobiles again last year. In the North American market, Mexican production now surpasses that of the U.S.’s neighbor to the north.

Mexico’s remarkable growth has been propelled by global automakers’ large investments to make small cars. This is something that’s not likely to reverse soon. As a matter of fact, it is anticipated that automobile investment will continue to enter Mexico in the foreseeable future.

New plants announced by companies such as Mazda Motor Corp., Nissan Motor Co., and Audi AG will help the nation to close the gap between itself and South Korea, the biggest exporter of automobiles after Germany and Japan. Car companies announced $5.3 billion in new investments from January through April alone. As more and more foreign manufacturers use Mexico as an export platform, the country is projected to advance annual auto output by 1 million vehicles, a 38% increase, within three years.

Mexico’s manufacture and export of cars and light trucks both rose to record highs during the first five months of this year. From January to May the country produced 1.15 million units, 12.5% more than the same period in the previous year and the record of any first five months. Mexico exported 945,530 vehicles over the same months, an increase of 13.7% from over a year ago. Mexico’s gross domestic product beat economists’ forecasts for growth in the second quarter, expanding 0.9% from the first three months of 2012. Growth has topped Brazil’s for the past year with the economy in the U.S., the buyer of 80% of Mexico’s exports, projected to expand 2.15 this year.

The statistics demonstrate how quickly Mexico has made itself into an auto producing powerhouse that is situated to grow even more throughout the next few years, while other auto exporting nations struggle to get back to pre-crisis production levels. As wages in China rise and higher oil prices increase cost for Asian companies looking to access consumers in the U.S., other companies are exploring the possibility of opening facilities in Mexico. The next five to seven years are expected to be a very good period for Mexico in terms of growing its automotive sector exports.