There’s a big demand for greater investment in automotive manufacturing in Mexico at all Tier levels—particularly from companies able to compete on pricing, quality, and flexibility.
“Toyota sees Mexico as a strategic country going forward, and we will continue to expand our supply base here, as we have for the last 20 years,” commented Greg Laskey, vice president of purchasing for Toyota North America, during the International Congress of the Automotive Industry in Mexico. The event was hosted by the National Auto Parts Industry (INA) on Oct. 2, 2020.
Laskey explained that automotive suppliers looking to develop a long-term relationship with the OEM will find there’s ample opportunity for partners able to prove they can offer “sustained competitiveness.”
For Mexico’s expansive automotive manufacturing industry, that’s excellent news. Since the early 1900s, the industry has proven it has what it takes to compete across North America and the world, and it’s evolving to meet the demand for tomorrow’s new demands.
Toyota’s expansion in Mexico
Toyota has manufactured in Mexico since 2003, when it opened its 844,000-square-foot plant in Baja California. The company saw a significant uptick in demand and other clear advantages that led it to launch a second plant in Apaseo el Grande, Guanajuato, in 2015. Demand has remained so strong that the company recently announced a $170 million expansion to its Guanajuato facility that will increase Toyota’s capacity to build up to 138,000 Tacoma pickup trucks per year.
According to Laskey, the clear advantages to operating in Mexico include opportunities for localization due to the USMCA, a global leader in free trade agreements, a location that provides simple entry across the North American market, and what Laskey calls a “highly skilled labor and what we see as a highly dedicated work force.” Together, he noted, those advantages are “great ingredients for future growth in Mexico.”
USMCA opportunities
Laskey also noted that Toyota is adapting to the opportunities presented by the now-in effect USMCA agreements updated rules of origin clause. The new free trade agreement has increased the threshold of North American content an automobile must contain, from 62.5% under NAFTA to 75% under USMCA. In pursuit of this requirement, Laskey says, “The opportunity here for further growth in Mexico lies in localization into our market here for parts and components.”
This demand for more North American-manufactured components is an opportunity for Toyota to expand its supply chain in Mexico at all tier levels. As the manufacturer evolves into its new role as a “mobility company”—a shift that accounts for growing demand for alternatives to traditional vehicle transportation—it’s supplier needs are likewise evolving. What’s more, Laskey said, the entire supply chain has tremendous opportunity for further maturation in support of this industry evolution.
A growing supply chain
Today, Toyota sources approximately $3 billion in parts and components in Mexico annually for Toyota Motor North America. Now, as the company expands its supplier base in Mexico, the company is seeking partners that can prove their competitiveness, not just on pricing but in having a strong foundation on quality, safety, and process improvement, as well as a strategic approach to decision-making.
This strength and strategic approach have become even more critical as companies rebound following global plant shutdowns due to the COVID-19 pandemic. Laskey said that Toyota is calling for partner companies that can flexibly respond to challenges, an ever-more critical need for companies that have been impacted by the pandemic.
For Toyota, that impact included a two-month shutdown followed by a tremendous surge in sales, the result of months of pent-up demand. In September, the organization saw a 16% year-over-year increase in sales. Meeting those unexpected surges, and adapting to new challenges, will require strong partnerships and an interconnected supply chain such as is already found in Mexico today.
“You can’t do competitiveness alone,” Laskey pointed out. “A sustainable competitive model absolutely depends on partnerships.”
Looking to supply Toyota in Mexico?
Tier 1, Tier 2, and Tier 3 automotive companies looking to help Toyota achieve their localization goals in Mexico will find they have ample resources available in Guanajuato. Mexico’s sixth largest manufacturing sector is found here, a state home to nearly 6 million people with an average age of 25. The state has a strong education network, strong connections to international highways and railways, and shelter service providers like Tetakawi that can simplify the process of operating in Mexico and help speed your products into the marketplace.
If you are thinking about manufacturing in Mexico to take advantage of the automotive industry supply chain, contact us today to learn about the quickest, most cost-effective, and risk-averse way to set up a factory in Mexico.
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